Futures Pointing To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to give back ground after ending the previous session mostly higher.

Traders may look to cash in on yesterday’s gains, which lifted the Dow toward the high end of the trading range seen over the past few weeks.

Concerns about the near-term outlook for the markets may also weigh on Wall Street, as some analysts warn the markets have come too far too fast in light of the ongoing coronavirus pandemic.

Most major companies have reported better than expected quarterly results this earnings season, but buying interest has been somewhat subdued amid worries about valuations.

Nonetheless, overall trading activity may be light as traders look ahead to the release of the Labor Department’s closely watched monthly jobs report on Friday.

Economists currently expect employment to jump by 980,000 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.

Payroll processor ADP will provide a preview of the jobs data on Wednesday with the release of its report on private sector employment in April.

Stocks moved mostly higher during trading on Monday, although the tech-heavy Nasdaq bucked the uptrend. The advance on the day lifted the Dow back within striking distance of last month’s record highs.

The major averages finished the day mixed. While the Nasdaq fell 67.56 points or 0.5 percent to 13,895.12, the Dow climbed 238.38 points or 0.7 percent to 34,113.23 and the S&P 500 rose 11.49 points or 0.3 percent to 4,192.66.

The strength on Wall Street partly reflected 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.

Reopening plays saw notable strength on the day after New York Governor Andrew Cuomo announced capacity limits for most businesses in New York, New Jersey and Connecticut will be lifted beginning May 19.

Separately, Florida Governor Ron DeSantis signed an executive order immediately suspending all local COVID-19 emergency mandates in the Sunshine State.

Meanwhile, traders largely shrugged off a report from the Institute for Supply Management showing an unexpected slowdown in the pace of growth in U.S. manufacturing activity.

The ISM said its manufacturing PMI slid to 60.7 in April after jumping to a more than 37-year high of 64.7 in March.

While a reading above 50 still indicates growth in manufacturing activity, economists had expected the index to inch up to 65.0.

“Worker absenteeism, short-term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

Gold stocks showed a substantial move to the upside on the day, resulting in a 4.8 percent spike by the NYSE Arca Gold Bugs Index. The rally by gold stocks came amid a sharp increase by the price of the precious metal.

Significant strength was also visible among energy stocks, which moved higher along with the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 4.5 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index jumped by 2.9 percent and 2.1 percent, respectively.

Steel, housing and transportation stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Meanwhile, weakness among semiconductor stocks weighed on the tech-heavy Nasdaq, with the Philadelphia Semiconductor Index falling by 1.2 percent.

Commodity, Currency Markets

Crude oil futures are climbing $0.85 to $65.34 a barrel after advancing $0.91 to $64.49 barrel on Monday. Meanwhile, after jumping $24.10 to $1,791.80 an ounce in the previous session, gold futures are falling $5.50 to $1,786.30 an ounce.

On the currency front, the U.S. dollar is trading at 109.11 yen compared to the 109.07 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.2024 compared to yesterday’s $1.2064.

Asia

Asian stocks rose broadly on Tuesday despite lingering concerns about the spike in coronavirus cases in the region.

China was closed for Labor Day, while the Japanese markets were closed for Greenery Day. Hong Kong’s Hang Seng Index climbed 199.60 points, or 0.7 percent, to 28,557.14.

Ending a long and severe recession, Hong Kong’s economy grew at the fastest pace in more than a decade in the first quarter of 2021, advance estimate from the Census and Statistics Department showed.

GDP grew 7.8 percent from a year earlier, in contrast to the decrease of 2.8 percent in the fourth quarter, underpinned by robust exports.

Australian markets eked out modest gains as the country’s central bank maintained its monetary policy as widely expected and repeated that it will not increase the cash rate until actual inflation is sustainably within the 2 to 3 percent target range.

Meanwhile, economic reports on trade balance and home loan commitments proved to be a mixed bag. The benchmark S&P/ASX 200 Index rose 39.10 points, or 0.6 percent, to 7,067.90, while the broader All Ordinaries Index ended up 36.70 points, or 0.5 percent, at 7,323.50.

Mining heavyweights BHP and Rio Tinto jumped around 2.5 percent, while energy stocks such as Oil Search and Santos gained around 2 percent. Gold miners Evolution Mining and Northern Star Resources soared 3-4 percent after gold prices climbed overnight.

Banks ANZ and Westpac fell around 1 percent each. In the tech sector, Appen, Afterpay, Xero and WiseTech Global lost 1-3 percent.

Treasury Wine Estates rallied 3.2 percent after it inked a deal with America’s second largest drinks distributor Republic National Distributing Company.

Travel agency Flight Centre slumped 4.6 percent after it forecast an underlying loss of around $250 million in the second half.

Seoul stocks rose to snap a five-day losing streak amid institutional buying. The benchmark Kospi ended up 20.17 points, or 0.6 percent, at 3,147.37 after falling nearly 0.6 percent earlier in the day to reach its lowest level since April 5.

Heavyweights Samsung Electronics, LG Chem and Hyundai Motor rallied 1-2 percent ahead of a public holiday on Wednesday.

South Korea’s consumer inflation accelerated to a near four-year high in April amid rising oil and agricultural prices, Statistics Korea said today.

New Zealand shares rallied, with the benchmark NZX-50 Index ending up 143.35 points, or 1.1 percent, at 12,912.19. Mainfreight shares hit a 52-week high before closing 2.2 percent higher at $75.00. A2 Milk added 3.4 percent.

Europe

European stocks are mixed on Tuesday, with U.K. shares outperforming as trading resumed after a long holiday weekend. Caution has prevailed, however, leading to choppy trading.

While the U.K.’s FTSE 100 Index has inched up by 0.1 percent, the French CAC 40 Index is down by 0.3 percent and the German DAX Index is down by 1.5 percent.

Dassault Aviation has soared in Paris after Egypt’s defense ministry decided to purchase an additional 30 Rafale fighter jets to equip its air force.

Travel agency TUI, budget airline EasyJet and British Airways owner IAG have also advanced amid reports Britain will announce the green list for countries that people can travel to on holiday shortly.

Mining and energy stocks are also moving higher on optimism that a global economic recovery is gathering pace, thanks to successful vaccine rollouts in much of the developed world.

Britvic, a plant-based drinks brand, has also risen. The company announced the acquisition of Plenish, which offers a range of organic, clean label, plant-based beverages across plant-based milks, cold-pressed juices and functional shots.

Meanwhile, Norwegian telecommunications company Telenor ASA has fallen percent after reporting a first quarter net loss.

Adecco Group has also dropped. After posting a profit in the first quarter, the Swiss recruitment firm cautioned that COVID-19 related uncertainties remain elevated.

German chipmaker Infineon has also tumbled after it warned of continued bottlenecks in a manufacturing supply chain that’s running at “full speed.”

Remote connectivity software company TeamViewer has also plunged despite reporting first quarter orders and core profit ahead of expectations.

In economic news, British mortgage lending logged its biggest increase on record in March ,largely driven by the extension of stamp tax duty holiday, the Bank of England said.

The lending secured on dwellings increased by GBP 11.8 billion in March, which was the strongest since the series began in April 1993.

U.S. Economic Reports

A report released by the Commerce Department on Tuesday showed the U.S. trade deficit hit a new record high in the month of March.

The Commerce Department said the trade deficit widened to $74.4 billion in March from a revised $70.5 billion in February.

The trade deficit was nearly in line with estimates, as economists had expected the deficit to widen to $74.5 billion from the $71.1 billion originally reported for the previous month.

The wider trade deficit came as the value of imports surged up by 6.3 percent to $274.5 billion, while the value of exports spiked by 6.6 percent to $200.0 billion.

At 10 am ET, the Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of March. Factory orders are expected to jump by 1.3 percent.

Stocks In Focus

After falling sharply in the previous session, shares of Vaxart (VXRT) are spiking in pre-market trading after the biotechnology company announced positive results from a phase 1 trial of its oral Covid-19 vaccine.

Research and advisory company Gartner (IT) is also seeing significant pre-market strength after reporting first quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of CVS Health (CVS) may also move to the upside after the drug store chain and health services company reported better than expected first quarter results and raised its full-year guidance.

On the other hand, shares of Mosaic (MOS) are seeing notable pre-market weakness even though the fertilizer maker reported first quarter results that exceeded analyst estimates.

Roomba maker iRobot (IRBT) may also come under pressure as concerns about rising costs overshadow the company’s better than expected first quarter results.

Shares of SmileDirectClub (SDC) are also likely to see initial weakness after the maker of teeth-straightening systems said an April cyberattack would impact its second revenues by approximately $10 to $15 million.