Continued Pullback By Treasury Yields May Generate Buying Interest

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks poised to extend the upward move seen in the previous session.

A continued pullback by treasury yields may lead to further strength on Wall Street, as the yield on the benchmark ten-year note has dipped below 1.6 percent.

The drop in yields partly reflects easing worries about inflation and the possibility the Federal Reserve could begin tapering its asset purchases.

Later this week, a reading on inflation said to be preferred by the Fed could have a notable impact on both stocks and bonds.

Following the mixed performance seen last week, stocks moved mostly higher during trading on Monday. The major averages all moved to the upside on the day, with the tech-heavy Nasdaq showing a particularly strong advance.

The major averages gave back ground going into the close but remained firmly positive. The Dow climbed 186.14 points or 0.5 percent to 34,393.98, the Nasdaq surged up 190.18 points or 1.4 percent to 13,661.17 and the S&P 500 jumped 41.19 points or 1 percent to 4,197.05.

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

Reopening plays saw notable strength on the day along with technology stocks, which benefited from a rebound in the value of bitcoin.

The economic calendar started 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.

Semiconductor stocks moved sharply higher over the course of the session, driving the Philadelphia Semiconductor Index up by 2.3 percent.

Considerable strength was also visible among software stocks, as reflected by the 2 percent jump by the Dow Jones U.S. Software Index.

Computer hardware stocks also turned in a strong performance on the day, with the NYSE Arca Computer Hardware Index climbing by 1.6 percent.

HP Inc. (HPQ) posted a strong gain after Citi upgraded its rating on the computer and printer maker’s stock to Buy from Neutral.

Oil, commercial real estate and networking stocks also saw notable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are slipping $0.32 to $65.73 a barrel after soaring $2.47 to $66.05 a barrel on Monday. Meanwhile, after climbing $7.80 to $1,884.50 an ounce in the previous session, gold futures are dipping $2.10 to $1,882.40 an ounce.

On the currency front, the U.S. dollar is trading at 108.90 yen compared to the 108.75 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.2257 compared to yesterday’s $1.2216.

Asia

Asian stocks ended broadly higher on Tuesday, as dovish comments from a series of Federal Reserve officials helped quell concerns about inflation and fears of monetary tightening.

Investors now keenly await inflation data due in the United States later this week for more clues about when the central bank might start tapering its bond purchases.

Chinese shares surged to their highest level since March as Beijing’s efforts to talk down commodity prices helped ease investor concerns about inflation.

The benchmark Shanghai Composite Index rallied 84.06 points, or 2.4 percent, to 3,581.34, while Hong Kong’s Hang Seng Index surged up 498.60 points, or 1.8 percent, at 28,910.86.

Shares of beverage company Kweichow Moutai Co. jumped 6 percent a day after Chinese media outlets reported that its parent company aimed to double revenue by 2025.

Japanese shares finished notably higher as a strong finish by the Nasdaq overnight boosted tech stocks. Tokyo Electron climbed 1.8 percent, Screen Holdings jumped 2.1 percent and Advantest added 2.4 percent.

The Nikkei 225 Index rose 189.37 points, or 0.7 percent, to 28,553.98, while the broader Topix closed 0.3 percent higher at 1,919.52.

The upside was capped after reports suggested that Japan was leaning towards extending emergency measures beyond May 31.

Airliners ANA Holdings and Japan Airlines dropped around 0.8 percent each after the U.S. State Department urged against travel to Japan.

Australian markets rose for a fourth day to reach a two-week high, with banks and miners pacing the gainers. The S&P/ASX 200 Index rallied 69.30 points, or 1 percent, to 7,115.20, while the broader All Ordinaries Index ended up 73.10 points, or 1 percent, at 7,349.10.

Miners BHP, Fortescue Metals Group and Rio Tinto gained between 1.3 percent and 1.6 percent. The big banks all rose about 1 percent. Energy stocks posted modest gains as oil prices climbed the most in a month on expectations of a boost in demand due to COVID-19 vaccinations.

Technology One shares jumped 2.1 percent after the software firm reported a 48 percent spike in profit for the first half. In the healthcare sector, heavyweight CSL added 0.9 percent.

Seoul stocks advanced as inflation fears ebbed and a survey showed consumer confidence in South Korea picked up steam in May.

The benchmark Kospi ended up 27.02 points, or 0.9 percent, at 3,171.32, snapping a three-day losing streak as foreign investors turned net buyers ahead of the Bank of Korea’s rate decision due Thursday.

The country’s central bank is seen keeping its interest rates at record lows for the rest of 2021 amid COVID-19 uncertainties and lingering worries about financial imbalances.

Europe

The major European bourses got off to a strong start, tracking the Wall Street rally overnight, with the DAX 30, SMI 20, Stoxx 600 and bourses in Hungary and Denmark hitting all time highs. France’s CAC 40 and Spain’s IBEX 35 hovered around period highs.

The U.K.’s FTSE 100 and CAC 40 soon corrected from the opening levels to trade near the flat-line, leaving Germany’s DAX 30 to lead the region’s stock market rally.

The DAX touched an all time high of 15,568, triggered by news of the takeover of Deutshe Wohnen by rival and Europe’s largest residential property group Vonovia.

Currently, the U.K.’s FTSE 100 Index is nearly unchanged, the French CAC 40 Index is up by 0.1 percent and the German DAX Index is up by 0.6 percent.

Markets shrugged off reports that Germany GDP shrank 1.8 percent in the quarter ended March 2021, despite being both slightly lower than a preliminary estimate of 1.7 percent and contrary to the 0.5 percent growth in the previous quarter.

The business confidence barometer for Germany, as reflected in the Ifo Business Climate Indicator, rose to 99.2 in the month of May from 96.6 in April versus the market estimate of 98.2, reflecting overall positive sentiment and overwhelming optimism.

The perception shared by Bank of England Governor Andrew Bailey about inflation not being a worry in the medium or longer term helped markets reduce their preoccupation with monetary tightening worries and focus elsewhere, particularly on the economic rebound and growth.

Meanwhile, U.K. public borrowing data released today indicated a decline in borrowing from £47.3 billion a year ago to £31.7 billion in April, the first dip since the emergence of the pandemic.

The Confederation of British Industry’s data on retail sales volume for the month of May dipped to 18 from the previous month’s reading of 20 and missed the market forecast of 30.

The CAC 40 consolidated around twenty year highs at 6,414 levels. Alstom rose to 1.6 percent over yesterday’s levels, while both Orange and Essilor Luxottica lost more than one percent.

Yesterday, the FTSE 100 had advanced by 0.5 percent, the CAC 40 had risen by 0.4 percent and the pan European Stoxx 600 had edged 0.1 percent higher. The Swiss and German stock markets were closed on account of local holidays.

On the data horizon, traders and investors look forward to the GFK consumer confidence numbers from Germany for June and the KOF leading indicators data from Switzerland for May, due later this week, to reinforce the belief in the vaccine-led economic turnaround in the Euro Area.

U.S. Economic Reports

Standard & Poor’s is scheduled to release its report on home prices in major metropolitan areas in the month of March at 9 am ET.

At 10 am ET, the Commerce Department is due to release its report on new home sales in the month of April. Economists expect new home sales to slump by 7.0 percent to an annual rate of 0.950 million.

The Conference Board is also scheduled to release its report on consumer confidence in the month of May at 10 am ET. The consumer confidence index is expected to drop to 119.0 in May after jumping to 121.7 in April.

Also at 10 am ET, Federal Reserve Vice Chair for Supervision Randal Quarles is due to testify on “Supervision and Regulation” before a virtual Senate Banking Committee hearing.

The Treasury Department is scheduled to announce the results of this month’s auction of $60 billion worth of two-year notes at 1 pm ET.

Stocks In Focus

Shares of Shake Shack (SHAK) are seeing significant pre-market strength after Goldman Sachs upgraded its rating on the restaurant chain’s stock to Buy from Neutral.

Adhesives and industrial coatings maker Nordson (NDSN) may also move to the upside after reporting fiscal second quarter results that exceeded analyst estimates on both the and bottom lines.

Shares of Cracker Barrel Old Country Store (CBRL) are also likely to see initial strength after the chain of restaurant and gift stores reported better than expected fiscal third quarter earnings.

On the other hand, shares of Lordstown Motors (RIDE) are moving sharply lower in pre-market trading after the electric vehicle maker slashed its production guidance for the year and said it is seeking additional capital.

Contracting services provider Dycom (DY) may also come under pressure after reporting an unexpected fiscal first quarter loss on revenues that came in below analyst estimates.