Upward Momentum May Lead To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to move back to the upside following the pullback seen last Friday.

The markets may continue to benefit from recent upward momentum, which helped propel the S&P 500 and the Nasdaq to new record highs last week.

Largely upbeat earnings and economic news has contributed to positive sentiment on Wall Street in recent sessions, although buying interest has been somewhat subdued.

Traders remain optimistic about the economic outlook, but analysts have raised some concerns about valuations and a potential correction.

Economic data is likely to attract attention in the coming days, with the Labor Department scheduled to release its closely watched monthly jobs report on Friday.

Economists currently expect employment to jump by 988,000 jobs in April after surging up by 916,000 jobs in May. The unemployment rate is also expected to dip to 5.8 percent from 6.0 percent.

Shortly after the start of trading, the Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of April.

Stocks moved mostly lower during trading on Friday, giving back ground following the advance seen on Thursday. The tech-heavy Nasdaq staged a recovery attempt in morning trading but quickly rejoined the Dow and S&P 500 in the red.

The major averages all closed firmly in negative territory. The Dow slid 185.51 points or 0.5 percent to 33,874.85, the Nasdaq dropped 119.87 points or 0.9 percent to 13,962.68 and the S&P 500 fell 30.30 points or 0.7 percent to 4,181.17.

For the week, the S&P 500 was nearly unchanged, while the Dow and the Nasdaq dipped by 0.5 percent and 0.4 percent, respectively.

The major all moved sharply higher for the month of April, however, with the Nasdaq and the S&P 500 spiking by 5.4 percent and 5.2 percent, respectively. The Dow also jumped by 2.7 percent.

The pullback on Friday may partly have reflected profit taking after the upward move seen on Thursday lifted the S&P 500 to a new record closing high.

The tech-heavy Nasdaq also reached a record intraday high during Thursday’s trading but pulled back and ended the session only modestly higher.

A steep drop by shares of Twitter (TWTR) also weighed on the markets, with the social media giant plunging by 3.7 percent.

The nosedive by Twitter came after the company reported better than expected first quarter results but provided disappointing guidance.

Energy giants Chevron (CVX) and Exxon Mobil (XOM) also showed notable moves to the downside after reporting their quarterly results.

Shares of Amazon (AMZN) ended the modestly lower even though the online retail giant reported first quarter earnings that far exceeded analyst estimates.

Meanwhile, traders largely shrugged off another batch of upbeat U.S. economic data, including a report from the Commerce Department showing personal income skyrocketed in March amid the distribution of another round of stimulus checks.

The Commerce Department said personal income soared by 21.1 percent in March after plunging by a revised 7.0 percent in February.

Economists had expected personal income to spike by 20.3 percent compared to the 7.1 percent slump originally reported for the previous month.

The report also showed personal spending jumped by 4.2 percent in March following a 1.0 percent decrease in February. Personal spending was expected to surge up by 4.1 percent.

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

The report said the consumer sentiment index for April was upwardly revised to 88.3 from a preliminary reading of 86.5. Economists had expected the index to be upwardly revised to 87.5.

The consumer sentiment index rose from 84.9 in March to reach its highest level since hitting 89.1 in March of 2020.

Oil service stocks have moved sharply lower over the course of the session, dragging the Philadelphia Oil Service Index down by 3.7 percent. The sell-off by oil service stocks came amid a steep drop by the price of crude oil.

Significant weakness was also visible among semiconductor stocks, as reflected by 2.9 percent slump by the Philadelphia Semiconductor Index.

Skyworks Solutions (SWKS) posted a steep loss after the chipmaker reported better than expected fiscal second quarter results but provided disappointing guidance.

Steel, networking and computer hardware stocks also showed notable moves to the downside amid broad based weakness on Wall Street.

Commodity, Currency Markets

Crude oil futures are inching up $0.01 to $63.59 a barrel after tumbling $1.43 to $63.58 a barrel last Friday. Meanwhile, after edging down $0.60 to $1,767.70 an ounce in the previous session, gold futures are jumping $18.30 to $1,786 an ounce.

On the currency front, the U.S. dollar is trading at 109.34 yen versus the 109.31 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.2047 compared to last Friday’s $1.2020.

Asia

Asian stocks ended little changed in thin holiday trading on Monday as investors digested a slew of manufacturing data and kept a wary eye on the COVID-19 surge in the region. Chinese and Japanese markets were closed for Labor Day and Constitution Memorial Day, respectively.

Hong Kong’s Hang Seng Index fell 367.34 points, or 1.3 percent, to 28,357.54 on the first trading day of the month.

Australian markets gave up early gains to end on a flat note. The benchmark S&P/ASX 200 Index inched up 3.00 points to 7,028.80, while the broader All Ordinaries Index ended marginally lower at 7,286.80.

Lender Westpac surged 5 percent after its half-year profits rebounded 256 percent from the depressed levels of a year ago. The other three big banks rose 1-2 percent ahead of the Reserve Bank of Australia monetary policy decision on Tuesday.

Mining heavyweights BHP and Rio Tinto fell 1.4 percent and 0.9 percent, respectively, on weak commodity prices.

Energy stocks such as Oil Search, Santos and Woodside Petroleum lost 1-2 percent as oil prices eased on worries that fuel demand in India would be impacted by soaring COVID-19 infections and consequent lockdowns.

In economic news, the manufacturing sector in Australia expanded at a faster pace in April, the latest survey from Markit Economics revealed, with a survey record manufacturing PMI score of 59.7, up from 56.8 in March.

Seoul stocks ended lower as short selling partially resumed on the bourses. The benchmark Kospi dropped 20.66 points, or 0.7 percent, to 3,127.20, extending losses for the fifth straight session.

Top pharmaceutical firm Samsung Biologics tumbled 3.9 percent and Celltrion slumped 6.2 percent, while chipmaker SK Hynix rallied 2.7 percent and automaker Hyundai Motor advanced 2.8 percent.

The manufacturing sector in South Korea continued to expand in April, albeit at a slower pace, the latest survey from Markit Economics revealed today, with a manufacturing PMI score of 54.6, down from 55.3 in March.

New Zealand shares ended a choppy session modestly higher. The benchmark NZX-50 Index ended up 37.71 points, or 0.3 percent, at 12,768.84, extending gains for the fourth day. SK Network Television shares rallied 3.5 percent and Oceania Healthcare jumped 3 percent.

Europe

European stocks are moving higher on Monday as German retail sales data for March beat forecasts, boosting hopes of a rapid economic recovery.

German retail sales grew by a real 7.7 percent on a monthly basis in March, Destatis reported. That was faster than the 2.7 percent increase in February and the 3 percent rise economists had forecast.

On a yearly basis, retail sales rebounded 11 percent, reversing a 6.6 percent slump in the previous month and confounding expectations for a decrease of 0.3 percent.

The Eurozone Manufacturing PMI was finalized at 62.9 in April, up from March’s 62.5, highest since records began in 1997, Markit said earlier in the day.

While the pan-European STOXX 600 Index has risen by 0.5 percent, the French CAC 40 Index is up by 0.6 percent and the German DAX Index is up by 0.7 percent.

Novartis shares have moved to the upside. Sandoz, a Novartis unit, said it would begin enrolling the first patients in MYLIGHT, a clinical Phase III confirmatory efficacy and safety study of its proposed biosimilar aflibercept, shortly.

German medical technology company Siemens Healthineers has also risen. The company again raised its outlook for fiscal 2021 based on continued strong business development in the second quarter and the transformative merger with Varian.

On the other hand, Dutch telecom firm Royal KPN NV has tumbled. The company confirmed that it has rejected an unsolicited takeover offer from a private equity consortium consisting of EQT and Stonepeak.

U.S. Economic Reports

The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of April at 10 am ET.

The ISM’s manufacturing PMI is expected to inch up to 65.0 in April from 64.7 in March, with a reading above 50 indicating growth in the manufacturing sector.

Also at 10 am ET, the Commerce Department is due to release its report on construction spending in the month of March. Construction spending is expected to jump by 2.0 percent.

New York Federal Reserve President John Williams is scheduled to speak before the Women in Housing and Finance Virtual Annual Symposium at 2:10 pm ET.

At 2:20 pm ET, Federal Reserve Chair Jerome Powell is due to speak at the National Community Reinvestment Coalition’s 2021 Just Economy Conference via livestream.

Stocks In Focus

Shares of Meredith Corp. (MDP) are moving sharply higher in pre-market trading after a report from Bloomberg said the media conglomerate is in advanced discussions to sell its 17 local TV stations to Gray Television (GTN) for more than $2.5 billion.

Sports betting company DraftKings (DKNG) may also see initial strength after Cowen upgraded its rating on the company’s stock to Outperform from Market Perform.

Shares of Moderna (MRNA) are also likely to move to the upside after the drugmaker announced an agreement with Gavi, the Vaccine Alliance to supply up to 500 million doses of its COVID-19 vaccine.

On the other hand, shares of Estée Lauder (EL) may come under pressure after the cosmetics maker reported fiscal third quarter earnings that exceeded analyst estimates but weaker than expected revenues.