Profit Taking May Lead To Initial Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower opening on Monday, with stocks likely to give back ground following the strong upward move seen last Friday.

Profit taking may contribute to initial weakness on Wall Street after the Dow and the S&P 500 ended the previous session at new record closing highs.

Nonetheless, overall trading activity may be somewhat subdued ahead of the release of the Labor Department’s monthly jobs report on Friday.

Stocks moved sharply higher during trading on Friday, extending the upward move seen over the course of Thursday’s session. With the continued advance, the Dow and the S&P 500 ended the session at new record closing highs.

The major averages accelerated to the upside going into the close. The Dow surged up 453.40 points or 1.4 percent to 33,072.88, the Nasdaq jumped 161.05 points or 1.2 percent to 13,138.73 and the S&P 500 spiked 65.02 points or 1.7 percent to 3,974.54.

For the week, the major averages turned in a mixed performance. While the Nasdaq fell by 0.6 percent, the Dow and the S&P 500 advanced by 1.4 percent and 1.6 percent, respectively.

The strength on Wall Street partly reflected optimism about the economy reopening after President Joe Biden doubled his goal for the administration of coronavirus vaccines in his first 100 days in office.

On Thursday Biden announced a new goal of administering 200 million coronavirus vaccinations within his first 100 days after reaching his goal of 100 million shots before his 60th day in office.

“I know it’s ambitious, twice our original goal. But no other country in the world has even come close, not even close to what we are doing. I believe we can do it,” Biden told reporters at his first official press conference as president.

According to the Centers for Disease Control and Prevention, 137 million Covid vaccines have been administered, with nearly 15 percent of the population fully vaccinated.

Banking stocks helped lead the way higher after the Federal Reserve announced restrictions on bank holding company dividends and share repurchases will end for most firms after June 30th.

The Fed said firms with capital levels above those required by the current round of stress tests will no longer be subject to the additional restrictions.

“The banking system continues to be a source of strength and returning to our normal framework after this year’s stress test will preserve that strength,” said Fed Vice Chair for Supervision Randal K. Quarles.

In U.S. economic news, the Commerce Department released a report showing personal income pulled back sharply in the month of February.

The Commerce Department said personal income plunged by 7.1 percent in February after skyrocketing by an upwardly revised 10.1 percent in January.

Economists had expected personal income to plummet by 7.3 percent compared to the 10.0 percent spike originally reported for the previous month.

The sharp pullback in personal income primarily reflected a decrease in government social benefits following the distribution of $600 stimulus checks in January.

The report also showed personal spending slumped by 1.0 percent in February after soaring by an upwardly revised 3.4 percent in January.

Economists had expected personal spending to decrease by 0.7 percent compared to the 2.4 percent jump originally reported for the previous month.

Meanwhile, a reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth slowed to 1.4 percent in February from 1.5 percent in January.

A separate report from the University of Michigan showed U.S. consumer sentiment improved by even more than previously estimated in the month of March.

The University of Michigan said its consumer sentiment index for March was upwardly revised to 84.9 from the preliminary reading of 83.0. Economists had expected the index to be upwardly revised to 83.6.

The consumer sentiment index is well above the final February reading of 76.8, reaching its highest level since hitting 89.1 in the same month a year ago.

Steel stocks moved sharply higher on optimism about the outlook for global demand, with the NYSE Arca Steel Index spiking by 5.7 percent.

Substantial strength was also visible among networking stocks, as reflected by the 4 percent jump by the NYSE Arca Networking Index.

Semiconductor and computer hardware stocks also saw considerable strength on the day, contributing to the advance by the tech-heavy Nasdaq.

Housing, tobacco, oil and chemical stocks also showed significant moves to the upside, reflecting broad based buying interest.

Commodity, Currency Markets

Crude oil futures are rising $0.48 to $61.45 a barrel after spiking $2.41 to $60.97 a barrel last Friday. Meanwhile, after rising $7.20 to $1,732.30 an ounce in the previous session, gold futures are sliding $7.50 to $1,724.80 an ounce.

On the currency front, the U.S. dollar is trading at 109.66 yen versus the 109.64 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1784 compared to last Friday’s $1.1793.

Asia

Asian stocks ended mixed on Monday as new coronavirus cases ticked upward again in the U.S. and China imposed retaliatory sanctions on U.S. and Canadian individuals and entities during the weekend.

Elsewhere in Europe, the European Commission warned that the European Union is at the start of a third wave of the pandemic.

Chinese shares gained ground on economic optimism after data showed annual profits at China’s industrial firms surged in the first two months of 2021.

The benchmark Shanghai Composite Index rose 16.97 points, or 0.5 percent, to 3,435.30, while Hong Kong’s Hang Seng Index finished marginally higher at 28,338.30.

Japanese shares advanced on optimism over earnings and the economic outlook. The Nikkei 225 Index climbed 207.82 points, or 0.7 percent, to 29,384.52, while the broader Topix closed 0.5 percent higher at 1,993.34. Tech stocks outperformed, with Screen Holdings, Advantest and Tokyo Electron jumping 2-3 percent.

Brokerage Nomura Holdings plunged 16.3 percent after it flagged a potential $2 billion loss at a U.S. subsidiary. Banks Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group fell 1.8 percent and 1.1 percent, respectively.

Meanwhile, Australian markets fell modestly as U.S. Treasury bond yields sat around one-year highs and the Queensland government announced a three-day lockdown in Greater Brisbane to contain a Covid-19 outbreak. In addition, there were fears that the end of the JobKeeper program on Sunday could lead to huge job losses.

The benchmark S&P/ASX 200 Index ended down 24.70 points, or 0.4 percent, at 6,799.50, giving up early gains. The broader All Ordinaries Index dropped 26.70 points, or 0.4 percent, to 7,036.40.

Energy stocks saw modest losses as oil prices fell on news the ship blocking the Suez Canal had been freed. Tech stocks Afterpay and Appen lost over 4 percent as bond yields jumped.

Wagering group Tabcorp gave up 2.7 percent after rejecting a $3 billion bid for its Wagering & Media business. Embattled wealth manager AMP tumbled 3.4 percent after a 30-day exclusivity period passed without a deal with Area Management for its private markets business.

On the positive side, miners BHP, Fortescue Metals Group and Rio Tinto rose about 2 percent amid optimism over U.S. infrastructure spending plans expected to be unveiled this week. Iluka Resources surged 6.9 percent and Bluescope added 3.3 percent.

Seoul stocks edged lower as investors adopted a cautious stance amid worsening U.S.-China relations over the human rights issue in Xinjiang and rising coronavirus cases around the world. The benchmark Kospi slipped 4.97 points, or 0.2 percent, to close at 3,036.04.

Chipmaker SK Hynix lost 2.2 percent and internet portal operator Naver slumped 2.9 percent. Pharmaceutical giant Celltrion surged 5.3 percent as the European Medicines Agency confirmed that the firm’s drug can be used to treat Covid-19.

Europe

European stocks are broadly higher on Monday, even as underlying sentiment remains cautious amid concerns over increasing Covid-19 cases across the continent.

The pan European Stoxx 600 Index has edged up 0.2 percent after climbing 0.9 percent on Friday. The German DAX and France’s CAC 40 Index are both up by 0.3 percent, while the U.K.’s FTSE 100 Index has bucked the uptrend and slipped 0.3 percent.

In corporate news, Credit Suisse shares have slumped after the Swiss bank warned of a “highly significant” hit to results due to its exposure to a single, unnamed client.

Domino’s Pizza Group shares have risen. The company has signed a binding sale and purchase deal with PPH ehf., an investment consortium, for the sale of its Iceland business Pizza Pizza ehf.

BP Plc and Royal Dutch Shell are moving lower as oil prices fall on news the cargo ship blocking the Suez Canal was partially refloated.

On a light day on the economic front, central bank data out of the U.K. showed that mortgage borrowing increased the most since 2016.

According to Bank of England, U.K. mortgage borrowing strengthened in February, with individuals borrowing an additional GBP 6.2 billion secured on their homes as the temporary stamp duty tax relief has been extended to the end of June.

The number of mortgage approvals declined to 87,669 in February from 97,350 in January. The expected level was 95,000.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today.