Futures Pointing To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Monday following the mixed performance seen last week.

Economic optimism may contribute to initial buying interest on Wall Street, as the country continues to reopen following the coronavirus pandemic.

Reopening plays are seeing pre-market strength along with technology stocks, which may benefit from a rebound in the value of bitcoin.

Trading activity may be somewhat subdued, however, with a lack of major U.S. economic data likely to keep some traders on the sidelines.

The economic calendar starts the week relatively quiet but picks up in the coming days with the release of reports on new home sales, consumer confidence, durable goods orders, and personal income and spending.

The personal income and spending report includes a reading on inflation said to be preferred by the Federal Reserve, which could have an impact on the outlook for monetary policy.

While the Fed has repeatedly signaled it believes the recent increase in inflation largely reflects “transitory factors,” a spike in prices could still raise concerns about the central bank tapering its asset purchases.

After moving to the upside early in the session, the major U.S. stock indexes turned mixed over the course of the trading day on Friday. While the Dow managed to remain in positive territory, the Nasdaq and the S&P 500 slid into the red.

The major averages finished the day on opposite sides of the unchanged line. The Dow rose 123.69 points or 0.4 percent to 34,207.84, but the Nasdaq fell 64.75 points or 0.5 percent to 13,470.99 and the S&P 500 edged down 3.26 points or 0.1 percent to 4,155.86.

For the week, the major averages also turned in a mixed performance. While the Nasdaq climbed by 0.3 percent, the Dow and the S&P 500 slid by 0.5 percent and 0.4 percent, respectively.

The mixed performance on the day came as traders continued to digest yesterday’s Labor Department report showing initial jobless claims once again dropped to their lowest level in well over a year.

The data further reinforced the view that the disappointing monthly employment report for April was an anomaly and not a sign of an economic downturn.

Traders generally remain optimistic about the economic outlook but also remain wary of signs that the Federal Reserve will soon consider tapering its asset purchases.

Meanwhile, the National Association of Realtors released a report this morning showing an unexpected decrease in existing home sales in the month of April.

NAR said existing home sales tumbled by 2.7 percent to an annual rate of 5.85 million in April after plunging by 3.7 percent to a rate of 6.01 million in March. The slump surprised economists, who had expected existing home sales to surge up by 2.0 percent.

Existing home sales declined for the third straight month but were still up by 33.9 percent compared to the same month a year ago.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Banking stocks showed a significant move to the upside, however, with the KBW Bank Index advancing by 1.3 percent.

Strength was also visible among oil service stocks, which moved higher as the price of crude oil for July delivery jumped $1.64 to $63.58 a barrel.

On the other hand, steel stocks saw considerable weakness on the day, resulting in a 1.2 percent drop by the NYSE Arca Steel Index.

Commodity, Currency Markets

Crude oil futures are climbing $0.85 to $64.43 a barrel after spiking $1.64 to $63.58 a barrel last Friday. Meanwhile, after falling $5.20 to $1,876.70 an ounce in the previous session, gold futures are rising $8.40 to $1,885.10 an ounce.

On the currency front, the U.S. dollar is trading at 108.88 yen versus the 108.96 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.2208 compared to last Friday’s $1.2182.

Asia

Asian stocks ended narrowly mixed on Monday as investors awaited several central bank rate decisions in the region as well as key U.S. inflation readings for guidance on monetary policy.

Despite most Fed officials dismissing higher prices as transitory, investors remain concerned that a high inflation reading could revive talks of an early tapering of the Fed’s bond buying program. Philadelphia Fed President Patrick Harker said Friday the Fed might have to discuss the matter sooner than later.

Chinese shares ended a choppy session higher as brokerage stocks received a boost from signs of ample liquidity and low interest rates. The benchmark Shanghai Composite Index rose 10.73 points, or 0.3 percent, to 3,497.28 while Hong Kong’s Hang Seng Index dipped 0.2 percent to 28,412.26.

Japanese shares posted modest gains as the country opened mass vaccination centers just two months before hosting the Olympics. The Nikkei 225 Index inched up 46.78 points, or 0.2 percent, to 28,364.61, while the broader Topix closed 0.4 percent higher at 1,913.04.

Traders remained somewhat concerned as the government prepares to extend a “state of emergency” to curb coronavirus infections in some areas beyond the initial ending date of May 31.

Market heavyweight SoftBank Group fell 2.2 percent, while Uniqlo operator Fast Retailing ended marginally higher. Automakers Honda and Toyota ended up more than 1 percent each.

Australian markets ended slightly higher, led by energy stocks. The benchmark S&P/ASX 200 Index swung between gains and losses before ending up 15.60 points, or 0.2 percent, at 7,045.90. The broader All Ordinaries index edged up 10.70 points, or 0.2 percent, to 7,276.

Higher crude prices lifted energy companies, with Woodside Petroleum, Oil Search and Santos rising 1-2 percent. Miners BHP, Fortescue Metals Group and Rio Tinto lost 2-4 percent, tracking weak iron ore prices after China warned commodity firms on prices.

The big four banks rose between 0.6 percent and 1.3 percent, while wealth manager AMP lost 3.6 percent and investment bank Macquarie Group declined 1.4 percent. Buy-now-pay-later firm Zip Co. gained 0.9 percent after unveiling expansion plans.

Seoul stocks edged lower for the third straight day on concerns about early post-pandemic inflation. The benchmark Kospi dropped 12.12 points, or 0.4 percent, to 3,144.30.

Chipmaker SK Hynix fell 2.5 percent and pharmaceutical giant Celltrion gave up 2.4 percent ,while banks gained ground ahead of the Bank of Korea’s rate decision due Thursday.

Europe

European stocks have risen on Monday to hover near record highs, as investors weighed inflation concerns against optimism over the global economic recovery from the coronavirus pandemic.

The focus remains on the volatility in the cryptocurrency space as well as key U.S. inflation readings due this week, with a high reading for the core inflation figures expected to revive talk of an early tapering by the U.S. Federal Reserve.

The pan European Stoxx 600 Index is modestly higher in thin trading, with markets in Austria, Denmark, Hungary, Norway, Switzerland and Germany closed for holidays. While the French CAC 40 Index is just above the unchanged line, the U.K.’s FTSE 100 Index is up by 0.1 percent.

Cineworld has rallied in London. The company said its U.K. cinemas attracted more people than expected in its first weekend of reopening following a months-long lockdown.

Airline Wizz Air Holdings and easyJet have also risen despite Germany’s public health institute on Friday declaring Britain and Northern Ireland a virus variant region.

Ryanair has edged higher. Belarusian opposition activist Roman Protasevich was arrested after a Ryanair flight from Greece to Lithuania was forced to land in Belarus over an alleged bomb scare.

Meanwhile, Swedish telecom equipment maker Ericsson has fallen. The company said that there is a risk that the decision by the Post and Telecommunication Authority to exclude Chinese vendors’ products from the 5G auction in Sweden may adversely impact its economic interests.

U.S. Economic Reports

Federal Reserve Governor Lael Brainard is scheduled to speak on “Digital Currencies” before a virtual Consensus by CoinDesk Conference at 9 am ET.

At 11 am ET, Cleveland Federal Reserve President Loretta Mester is due to give opening remarks before a virtual Cleveland Fed Conversations on Central Banking: Diversity and Central Bank Communication event.

Atlanta Federal Reserve President Raphael Bostic is scheduled to speak on “Public Policy Responses to COVID Pandemic” before a virtual Homer Hoyt Institute’s Weimer School of Advanced Studies in Real Estate and Land Economics session at 12 pm ET.

At 5:30 pm ET, Kansas City Federal Reserve President Esther George is due to speak at the Kansas City Fed’s virtual Agricultural Symposium.

Stocks In Focus

Shares of Virgin Galactic (SPCE) are skyrocketing in pre-market trading after the space tourism company successfully conducted its first space flight in more than two years.

Computer and printer maker HP Inc. (HPQ) may also see initial strength after Citi upgraded its rating on the company’s stock to Buy from Neutral.

Shares of Beyond Meat (BYND) are also seeing notable pre-market strength after Jefferies upgraded its rating on the plant-based meat maker to Outperform from Underperform.

On the other hand, shares of Dollar General (DG) are likely to move to the downside after Bank of America Securities downgraded its rating on the discount retailer to Underperform from Neutral.