Optimism About Reopening May Lead To Rebound On Wall Street

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to move back to the upside after ending yesterday’s choppy session modestly lower.

Early buying interest may be generated by continued economic optimism as the country continues to reopen following the coronavirus pandemic.

Shares of Royal Caribbean (RCL) are seeing notable pre-market strength after the cruise operator became the first to receive approval from the Centers for Disease Control and Prevention to begin test sailing in U.S. waters.

Norwegian Cruise Line Holdings (NCLH) may also move to the upside after announcing the next phase of its planned resumption of cruising across its three cruise lines, revealing plans for eight additional ships to relaunch beginning this fall.

The news from the cruise lines comes amid other signs of the steady reopening of the economy as an increasing number of Americans receive a coronavirus vaccine.

A continued rebound by bitcoin may also generate positive sentiment on Wall Street, with the cryptocurrency climbing back above $40,000.

Electric car maker Tesla (TSLA), which is a large holder of bitcoin, is moving notably higher in pre-market trading.

Nonetheless, overall trading activity may be somewhat subdued as traders continue to look ahead to a closely watched reaching on inflation on Friday.

Stocks moved to the upside early in the trading day on Tuesday but failed to sustain the advance and showed a lack of direction over the course of the session. The major averages spent much of the day lingering near the unchanged line.

The major averages eventually ended the session modestly lower. The Dow dipped 81.52 points or 0.2 percent to 34,312.46, the Nasdaq edged down 4.00 points or less than a tenth of a percent to 13,657.17 and the S&P 500 slipped 8.92 points or 0.2 percent to 4,188.13.

The early strength on Wall Street came amid a continued pullback by treasury yields, with the yield on the benchmark ten-year note falling 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.

While yields remained lower throughout the day, traders may have been reluctant to continue buying stocks ahead of the release of a reading on inflation said to be preferred by the Fed on Friday.

On the U.S. economic front, the Commerce Department released a report showing a substantial decrease in new home sales in the month of April.

The report said new home sales slumped by 5.9 percent to an annual rate of 863,000 in April after jumping by 7.4 percent to a significantly downwardly revised rate of 917,000 in March.

Economists had expected new home sales to tumble by 7.0 percent to a rate of 950,000 from the 1.021 million originally reported for the previous month.

A separate report released by the Conference Board showed consumer confidence in the U.S. held steady in the month of May.

The Conference Board said its consumer confidence index edged down to 117.2 in May after climbing to a revised 117.5 in April.

Economists had expected the consumer confidence index to pull back to 119.5 from the 121.7 originally reported for the previous month.

Despite the lackluster performance by the broader markets, steel stocks showed a significant move to the downside on the day, dragging the NYSE Arca Steel Index down by 2.4 percent to its lowest closing level in almost a month.

Energy stocks also saw considerable weakness even though the price of crude oil ended the day slightly higher.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index tumbled by 2.3 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index both slumped by 2 percent.

Tobacco, financial and utilities stocks also moved notably lower over the course of the session, contributing to the pullback by the major averages.

Commodity, Currency Markets

Crude oil futures are slipping $0.37 to $65.70 a barrel after inching up $0.02 to $66.07 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,911.40, up $13.40 compared to the previous session’s close of $1,898. On Tuesday, gold climbed $13.50.

On the currency front, the U.S. dollar is trading at 108.87 yen compared to the 108.78 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2227 compared to yesterday’s $1.2250.

Asia

Asian stocks turned in a mixed performance on Wednesday despite a continued pullback in treasury yields, which reflected easing worries about inflation after several Federal Reserve officials reiterated that any inflation will be transitory and the Fed will maintain its current dovish monetary policy stance.

China’s Shanghai Composite Index rose 12.02 points, or 0.3 percent, to 3,593.36, while Hong Kong’s Hang Seng Index ended up 255.15 points, or 0.9 percent, at 29,166.01.

Japanese shares eked out modest gains despite lingering concerns over rising coronavirus infection rates, caused by highly contagious variants of the virus and the slow vaccine roll out.

The Nikkei 225 Index edged up 88.21 points, or 0.3 percent, to 28,642.19, while the broader Topix closed marginally higher at 1,920.67. ANA, Screen Holdings, Panasonic, Kawasaki Heavy Industries and Keisei Electric Railway gained 3-5 percent.

Steelmakers succumbed to profit taking after China signaled it would focus on efforts to cool soaring raw material prices. Nippon Steel tumbled 3.5 percent and Kobe Steel lost 3.3 percent.

Australian markets fell slightly to snap a four-day winning streak as a cluster of COVID-19 cases grew in Victoria, sparking fears of a snap lockdown of the country’s second-most populous state.

The benchmark S&P/ASX 200 Index dropped 22.70 points, or 0.3 percent, to 7,092.50 after closing at a two-week high the previous day. The broader All Ordinaries Index ended down 17.50 points, or 0.2 percent, at 7,331.60.

Miners BHP, Fortescue Metals Group and Rio Tinto all fell over 2 percent as the surge across commodity prices has eased amid China’s warning against hoarding and speculation.

Energy stocks such as Woodside Petroleum and Santos lost around 1 percent as oil prices slipped on worries that a possible return of Iranian supply could cause a glut. Beach Energy shed 1.6 percent and Worley gave up 1.8 percent.

Gold miners surged as bullion prices scaled a more than four-month peak, helped by a weaker dollar and a retreat in U.S. Treasury yields. Evolution Mining, Northern Star Resources and Regis Resources climbed 2-3 percent. Tech stocks also finished broadly higher, with WiseTech Global rallying 3.1 percent.

In economic news, the value of total construction work done in Australia was up a seasonally adjusted 2.4 percent sequentially in the first three months of 2021, official data showed.

Seoul stocks swung between gains and losses before finishing marginally lower for the day. The benchmark Kospi ended down 2.89 points at 3,168.43 as valuation concerns offset investor optimism over a fast economic recovery. Chemical firm LG Chem led declines to end 6.7 percent lower.

Business confidence in South Korea was stable in May, the latest survey from the Bank of Korea showed today, with a score of 96.0 – unchanged from the April reading.

Europe

European stocks have moved modestly lower over the course of the session after initially benefitting from positive business and consumer sentiment data from France.

France’s consumer confidence index rose to 97 in May from 95 in April, statistical office Insee said. The score came in line with economists’ expectations.

The manufacturing sentiment index advanced to 107 in May from 104 in the previous month. Economists had forecast the score to rise moderately to 106. This was the highest score since August 2018, when the reading was 109.

U.S. Treasury yields were mixed after Federal Reserve officials reiterated their dovish views on easy monetary policy and inflation.

Closer to home, ECB Executive Board member Fabio Panetta told Nikkei that the economic recovery in the euro zone is not strong enough for the European Central Bank to scale back its emergency asset buying at a June meeting.

While the U.K.’s FTSE 100 Index has dipped by 0.3 percent, the German DAX Index is down by 0.1 percent and the French CAC 40 Index is just below the unchanged line.

French food company Danone has moved to the downside after Berenberg downgraded its rating on the company’s stock to Sell.

Quality assurance group Intertek has also fallen. The British company reported like-for-like revenue growth of 2.7 percent for the Jan-April 2021 period and said it is on track to deliver 2021 targets for revenue, margin accretion and free cash flow.

Real estate investment trust British Land has also come under pressure after posting its third consecutive annual loss.

On the other hand, shares of Marks & Spencer have moved sharply higher after the retailer reported well-received results.

Delivery Hero shares have also risen. Spanish q-commerce startup Glovo said it would take over the online food ordering company’s businesses in Bosnia Herzegovina, Bulgaria, Montenegro, Romania and Serbia, and acquire certain assets of its Croatian operations.

U.S. Economic Reports

Federal Reserve Vice Chair for Supervision Randal Quarles is due to speak on “Insurance Regulation” before a virtual National Association of Insurance Commissioners International Insurance Forum at 10 am ET.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended May 21st.

Crude oil inventories are expected decrease by 1.3 million barrels after rising by 1.3 million barrels in the previous week.

The Treasury Department is due to announce the results of this month’s auction of $61 billion worth of five-year notes at 1 pm ET.

At 3 pm ET, Fed Vice Chair Quarles is scheduled to speak on the economic outlook before a virtual Hutchins Center on Fiscal and Monetary Policy event.

Stocks In Focus

Shares of Urban Outfitters (URBN) are moving sharply higher in pre-market trading after the apparel retailer reported fiscal first quarter results that exceeded analyst estimates on both the top and bottom lines.

Sporting goods retailer Dick’s Sporting Goods (DKS) is also likely to see initial strength after reporting better than expected fiscal first quarter results and providing upbeat full-year guidance.

Shares of Abercrombie & Fitch (ANF) may also move to the upside after the apparel retailer reported an unexpected fiscal first quarter profit on revenues that exceeded analyst estimates.

On the other hand, shares of Nordstrom (JWN) are seeing significant pre-market weakness after the department store operator reported a wider than expected first quarter loss.