U.S. Stocks May Show A Lack Of Direction In Early Trading

The major U.S. index futures are currently pointing to a roughly flat open on Monday, with stocks likely to show a lack of direction following the upward move seen last week.

A lack of major U.S. economic data may keep traders on the sidelines ahead of the release of a report on consumer price inflation in the coming days.

The consumer price inflation report could have a significant impact on the outlook for inflation and the Federal Reserve’s monetary policy.

Stocks showed a strong move to the upside during trading on Friday as traders reacted to the Labor Department’s closely watched monthly jobs report. With the upward move, the major averages ended the session at their best closing levels in a month.

The major averages all closed firmly in positive territory, although the tech-heavy Nasdaq outperformed its counterparts. While the Nasdaq jumped 199.98 points or 1.5 percent to 13,814.49, the S&P 500 advanced 37.04 points or 0.9 percent to 4,229.89 and the Dow rose 179.35 points or 0.5 percent to 34,756.39.

For the holiday-shortened week, the Nasdaq climbed by 0.5 percent, the S&P 500 increased by 0.6 percent and the Dow advanced by 0.7 percent.

The strength on Wall Street came after the Labor Department report showed job growth in the U.S. reaccelerated in May but still fell short of economist estimates.

Non-farm payroll employment jumped by 559,000 jobs in May after climbing by an upwardly revised 278,000 jobs in April.

Economists had expected employment to surge by 650,000 jobs compared to the addition of 266,000 jobs originally reported for the previous month.

Employment in the leisure and hospitality sector showed another significant increase, spiking by 292,000 jobs during the month. Notable job growth was also seen in public and private education and health care and social assistance.

The Labor Department also said the unemployment rate fell to 5.8 percent in May from 6.1 percent in April, while economists had expected the unemployment rate to dip to 5.9 percent.

With the bigger than expected decrease, the unemployment rate dropped to its lowest level since hitting 4.4 percent in March of 2020.

Traders seemed to view the weaker than expected job growth as a “Goldilocks” situation, where the economy is expanding but not fast enough to encourage the Federal Reserve to tighten monetary policy.

Paul Ashworth, Chief U.S. Economist at Capital Economics, noted employment remains 7.6 million below its pre-pandemic peak and said it would take more than 12 months at the current pace to fully eradicate the shortfall.

“In any other set of circumstances, monthly gains in excess of half a million would be amazing but, with a 7.6 million shortfall, it will be some time at that pace before the Fed’s ‘substantial further progress’ has been met,” Ashworth said.

The Fed has said it won’t begin tapering its asset purchases until “substantial further progress” has been made toward its goals of maximum employment and price stability.

Semiconductor stocks turned in some of the market’s best performances on the day, resulting in a 2.4 percent jump by the Philadelphia Semiconductor Index.

Chipmaker Broadcom (AVGO) posted a notable gain after reporting better than expected fiscal second quarter results and providing upbeat guidance.

Significant strength was also visible among software stocks, with the Dow Jones U.S. Software Index surging up by 2 percent.

Networking stocks also saw considerable strength on the day, driving the NYSE Arca Networking Index up by 1.7 percent to a new record closing high.

Outside of the tech sector, gold stocks moved notably higher amid a rebound by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are slipping $0.21 to $69.41 a barrel after climbing $0.81 to $69.62 a barrel last Friday. Meanwhile, after jumping $18.70 to $1,892 an ounce in the previous session, gold futures are falling $3.20 to $1,888.80 an ounce.

On the currency front, the U.S. dollar is trading at 109.30 yen versus the 109.52 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.2164 compared to last Friday’s $1.2167.

Asia

Asian stocks ended mixed on Monday as investors weighed comments by U.S. Treasury Secretary Janet Yellen on interest rates against weaker than expected U.S. nonfarm payrolls data released on Friday. Disappointing Chinese trade data also kept underlying sentiment cautious.

Chinese shares ended slightly higher despite downbeat trade data. China’s imports and exports grew again in May, but both missed expectations, official data released earlier in the day showed.

The benchmark Shanghai Composite Index rose 7.70 points, or 0.2 percent, to 3,599.54, while Hong Kong’s Hang Seng Index ended down 130.82 points, or 0.5 percent, at 28,787.28.

Japanese shares edged higher to extend gains from the previous session as investor concerns about inflation ebbed.

The Nikkei 225 Index rose as much as 1 percent to hit a nearly four-week high in early trading before giving up most gains to end the session up 77.72 points, or 0.3 percent, at 29,019.24.

The broader index ended little changed with a positive bias at 1,960.85, after having scaled a two-month intraday high earlier in the session.

Tech stocks ended mixed, with Ibiden climbing 3.5 percent. With ocean freight rates rising steadily, shipping firm Nippon Yusen rose 2.4 percent to hit a 12-year high, Kawasaki Kisen jumped 5.5 percent and Mitsui OSK Lines advanced 2.3 percent.

Steelmakers fell on profit taking after recent strong gains. Nippon Steel plunged 5.7 percent, JFE Holdings plummeted 7.2 percent and Kobe Steel slumped 5.2 percent. Banks Mitsubishi UFJ Financial and Sumitomo Mitsui Financial fell over 1 percent, tracking lower U.S. bond yields.

Australian markets fluctuated before ending slightly lower as Victoria State reported its biggest rise in new local COVID-19 cases in a week.

The benchmark S&P/ASX 200 Index dropped 13.50 points, or 0.2 percent, to 7,281.90, while the broader All Ordinaries index ended down 11.70 points, or 0.2 percent, at 7,531.60.

Lender NAB tumbled 3.2 percent after saying it is under investigation for suspected serious and ongoing breaches of anti-money laundering laws.

Crown Resorts fell 1.5 percent and Star Entertainment Group lost over 2 percent for suspected breaches of anti-money laundering laws.

Mining heavyweights BHP and Rio Tinto posted modest gains. Technology stocks rose broadly, with Afterpay rising 2 percent, Wisetech Global climbing 3 percent and Appen surging 6.1 percent.

Hansen Technologies jumped 22.6 percent to reach record highs after the software firm received a $1-billion buyout pitch from private equity firm BGH Capital.

The services sector in Australia expanded at a slightly faster pace in May, the latest survey from the Australian Industry Group revealed today with a seasonally adjusted Performance of Services Index score of 61.2, up from 61.0 in April. This was the highest monthly result in the Australian PSI since October 2003.

Markets in New Zealand were closed for Queen’s birthday. Seoul stocks closed at a record high as weaker than expected U.S. jobs data helped ease concerns over early tapering by the Federal Reserve.

The benchmark Kospi inched up 12.04 points, or 0.4 percent, to close at 3,252.12, marking the highest closing ever. Internet portal operator Naver rose 1.5 percent and chemical firm LG Chem added 0.6 percent.

Europe

European stocks were mixed on Monday, as investors digested downbeat data and awaited U.S. inflation data and a European Central Bank meeting this week for directional cues.

China’s imports and exports grew again in May, but both missed expectations, official data released earlier in the day showed.

German factory orders dropped 0.2 percent month-on-month in April due to weak domestic demand, in contrast to the 3.9 percent increase seen in March and economists’ forecast of +1.0 percent, data from Destatis revealed.

On the positive side, Sentix’s index for the euro zone climbed to 28.1 from 21.0 in May.

The pan European Stoxx 600 was little changed with a positive bias at 452.68 after closing 0.4 percent higher on Friday.

The German DAX and France’s CAC 40 index were marginally lower, while the U.K.’s FTSE 100 was up 0.3 percent, recovering from an early slide.

Homebuilder Barratt Developments climbed 2.4 percent in London and Taylor Wimpey advanced 2.5 percent after data showed U.K. house prices reached another record high in May.

Miners Antofagasta and Glencore fell 1-2 percent as copper prices dipped on downbeat China export data.

Anglo American lost 2.7 percent after it completed the demerger of its thermal coal operations in South Africa.

Total SE, BP Plc and Royal Dutch Shell were modestly lower as oil prices slipped from two-year highs ahead of talks this week between Iran and world powers over a nuclear deal that is expected to boost crude supplies.

Office space provider IWG plunged 14 percent to hit a four-month low after issuing a profit warning.

Shares of Avacta Group jumped nearly 4 percent. The biotechnology company announced that the MHRA has confirmed registration of its AffiDX SARS-CoV-2 antigen lateral flow test.

French vouchers and cards provider Edenred rallied 3.2 percent after Deutsche Bank upgraded the stock to “buy”.

argenx SE, an immunology company, slumped 6.5 percent after a Johnson & Johnson subsidiary discontinued a collaboration agreement for its anti-CD70 antibody cusatuzuma.

Italian lender Unicredit gained 2.7 percent as Jefferies upgraded the stock to “buy”.

U.S. Economic Reports

The Federal Reserve is scheduled to release its report on consumer credit in the month of April at 3 pm ET. Consumer credit is expected to increase by $20.0 billion.

Stocks In Focus

Shares of U.S. Concrete (USCR) are moving sharply higher in pre-market trading after the supplier of aggregates and ready-mixed concrete agreed to be acquired by Vulcan Materials (VMC) for $74 per share or about $1.29 billion in cash.

Apparel maker G-III Apparel (GIII) is also likely to see initial strength after reporting much better than expected fiscal first quarter results and providing upbeat guidance.

Shares of Visa (V) may also move to the upside after Piper Sandler upgraded its rating on the credit card company’s stock to Overweight from Neutral.