Futures Pointing To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to move back to the upside following the pullback seen last Friday.

The markets may benefit from recent upward momentum, which has helped lift stocks to new record highs despite concerns about the spread of the delta variant of the coronavirus.

Traders remain optimistic about the outlook for the economy amid indications the Federal Reserve is not in a hurry to begin scaling back stimulus.

Positive sentiment may also have been generated after a bipartisan group of Senators unveiled a nearly $1 trillion infrastructure package.

Senate Majority Leader Chuck Schumer, D-N.Y., said he believes the Senate will vote to approve the massive bill in a matter of days.

Later this week, trading may be impacted by reaction to the Labor Department’s closely watched report on the employment situation in the month of July.

Economists currently expect employment to spike by about 900,000 jobs in July after surging by 850,000 jobs in June. The unemployment rate is expected to dip to 5.7 percent from 5.9 percent.

After coming under pressure at the start of trading, stocks remained mostly lower over the course of the session on Friday. With the pullback on the day, the major averages offset the strength seen during trading on Thursday.

The major averages all finished the day firmly in negative territory. The Dow fell 149.06 points or 0.4 percent to 34,935.47, the Nasdaq slid 105.59 points or 0.7 percent to 14,672.68 and the S&P 500 dropped 23.89 points or 0.5 percent to 4,395.26.

For the week, the tech-heavy Nasdaq slumped by 1.1 percent, while the Dow and the S&P 500 both decreased by 0.4 percent.

However, the major averages all posted strong gains for the month of July. The S&P 500 surged up by 2.3 percent, while the Dow and the Nasdaq jumped by 1.3 percent and 1.2 percent, respectively.

A steep drop from Amazon (AMZN) weighed on the markets, with the online retail giant plunging by 7.6 percent to its lowest closing level in well over a month.

The nosedive by Amazon came after the company reported second quarter earnings that beat expectations, but its revenues missed estimates for the first time since the third quarter of 2018.

Shares of Pinterest (PINS) also moved sharply lower after the image-sharing website operator reported better than expected second quarter earnings and revenues but a quarterly decline in monthly average users.

Caterpillar (CAT), Exxon Mobil (XOM) and Chevron (CVX) also moved to the downside despite reporting quarterly results that exceeded analyst estimates.

On the other hand, Procter & Gamble (PG) posted a strong gain after reporting better than expected fiscal fourth quarter results, although the consumer products giant also warned about the impact of higher input costs.

In U.S. economic news, the Commerce Department released a report unexpectedly showing a slight increase in personal income in the month of June.

The report showed personal income inched up by 0.1 percent in June after tumbling by a revised 2.2 percent in May.

The uptick surprised economists, who had expected personal income to dip by 0.3 percent compared to the 2.0 percent slump originally reported for the previous month.

Meanwhile, the Commerce Department said personal spending jumped by 1.0 percent in June after edging down by a revised 0.1 percent in May.

Economists had expected personal spending to increase by 0.7 percent compared to the unchanged reading originally reported for the previous month.

The report also showed the annual rate of core consumer price growth crept up to 3.5 percent in June from 3.4 percent in May.

Revised data released by the University of Michigan showed consumer sentiment in U.S. decreased by slightly less than initially estimated in the month of July.

The report said the consumer sentiment index for July was upwardly revised to 81.2 from a preliminary reading of 80.8 but remains below the June reading of 85.5. Economists had expected the index to be unrevised.

Retail stocks saw substantial weakness amid the steep drop by Amazon, with the Dow Jones U.S. Retail Index plunging by 3.2 percent to its lowest closing level in a month.

Significant weakness was also visible among airline stocks, as reflected by the 3.1 percent nosedive by the NYSE Arca Airline Index.

Energy stocks also saw considerable weakness on the day even though the price of crude oil moved modestly higher.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index tumbled by 2.8 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index fell by 1.6 percent.

Steel, banking and utilities stocks also saw notable weakness on the day, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are sliding $0.84 to $73.11 barrel after rising $0.33 to $73.95 a barrel last Friday. Meanwhile, after slumping $18.60 to $1,817.20 an ounce in the previous session, gold futures are falling $5 to $1,812.20 an ounce.

On the currency front, the U.S. dollar is trading at 109.47 yen versus the 109.72 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1882 compared to last Friday’s $1.1870.

Asia

Asian stocks advanced on Monday, with upbeat economic data from the United States and Europe and progress on a U.S. infrastructure spending bill boosting sentiment. The latest batch of manufacturing reports from the region proved to be a mixed bag.

Chinese shares posted strong gains as authorities moved to soothe fears over a crackdown on tech companies and a top decision-making body of the ruling Communist Party said China would maintain stable macro policies in the second half of the year to ensure growth.

China’s Shanghai Composite Index soared 66.93 points, or 2 percent, to 3,464.29, while Hong Kong’s Hang Seng Index ended up 274.77 points, or 1.1 percent, at 26,235.80.

The gains came even as data showed Chinese factory activity expanded at a slower pace in July, adding to concerns of a slowdown in the world’s second-biggest economy.

The official Purchasing Managers’ Index fell to 50.4 in July from 50.9 in June, while the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) dropped to 50.3 last month from 51.3 in June, hitting the lowest level in 15 months.

Japanese shares rallied as focus shifted to corporate earnings from big companies due this week. The Nikkei 225 Index jumped 497.43 points, or 1.8 percent, to 27,781.02, while the broader Topix settled 2.1 percent higher at 1,940.05.

Toyota, Sony, Nintendo and Toyota Motor rose between 1.5 percent and 2.3 percent ahead of their earnings reports due this week. Mitsubishi Heavy Industries gained 0.6 percent after saying it returned to profitability in the April-June fiscal first quarter.

The manufacturing sector in Japan expanded at a faster pace in July, the latest survey from Jibun Bank showed today, with a manufacturing PMI score of 53.0, up from 52.4 in June.

Australian markets hit a record high, led by tech stocks. The benchmark S&P/ASX 200 Index surged up 98.80 points, or 1.3 percent, to settle at 7,491.40, while the broader All Ordinaries Index ended up 96.30 points, or 1.3 percent, at 7,760.50.

Afterpay jumped nearly 19 percent as U.S.-based Square Inc. agreed to buy the buy now, pay later firm for $29 billion in an all-stock deal. Zip Co. shares surged 9 percent and Sezzle rallied 3.7 percent.

Energy firm Oil Search soared 4.7 percent after it agreed to an improved all-share offer from Santos. The big four banks all rose around 2 percent, while miners Fortescue Metals Group and Mineral Resources lost 2 percent and 4.4 percent, respectively on weak metal prices.

In economic news, the manufacturing sector in Australia continued to expand in July, albeit at a slower pace, the latest surveys from Markit Economics and the Australian Industry Group showed.

Seoul stocks rebounded as strong economic data fueled optimism for a quick economic rebound from the pandemic. The benchmark Kospi gained 20.72 points, or 0.7 percent, to close at 3,223.04 after data showed South Korea’s July exports jumped 29.6 percent year-on-year to a record high amid high demand for chips and biohealth products.

Investors shrugged off survey results from Markit Economics showing that the manufacturing sector in the country expanded at a slower pace in July.

Market heavyweight Samsung Electronics gained 1 percent, leading chemical firm LG Chem advanced 2.6 percent and No. 2 chipmaker SK Hynix added 3.1 percent.

Europe

European stocks have advanced on Monday as optimism around earnings and economic reopening helped investors shrug off signs of slowing growth in China.

Risk appetite was also boosted after the U.S. Senate on Sunday finalized the text of its $1 trillion bipartisan infrastructure bill. The legislation will next be introduced to the Senate.

Closer to home, euro area manufacturing sector growth moderated in July, but the pace of expansion remained elevated, final data from IHS Markit showed.

The final factory Purchasing Managers’ Index fell to 62.8 from 63.4 in June. This was the lowest reading since March. But the reading was above the flash 62.6, and the sector has recorded successive months of expansion since July 2020.

German retail sales growth exceeded expectations in June, as the relaxation of restrictions related to the pandemic supported consumer demand, data from Destatis revealed earlier today.

Retail sales grew 4.2 percent month-on-month in June, much faster than economists’ forecast of 2 percent. Nonetheless, the latest increase was slower than the 4.6 percent growth logged in May.

Elsewhere, Britain’s factories reported a further slowing of growth in July due to shortages and supply chain problems caused by the COVID-19 pandemic, in line with expectations.

The Bank of England looks set to raise its forecasts for inflation on Thursday, at the end of its August meeting.

While the German DAX Index has inched up by 0.2 percent, the U.K.’s FTSE 100 Index is up by 0.6 percent and the French CAC 40 Index is up by 0.8 percent.

Aerospace company Meggitt has moved sharply higher in London after it agreed to a takeover offer from Parker-Hannifin Corp.

Jet and auto parts supplier Senior Plc has also shown a strong move to the upside after raising full-year expectations.

HSBC Holdings shares have also advanced after the Asia-focused lender reported that its first-half profit more than doubled.

NatWest Group has also rallied after unveiling plans to distribute capital to shareholders.

Axa has also climbed in Paris as it reported higher revenues across its global insurance and reinsurance business, driven by improving pricing and market conditions.

Vonovia has also moved higher. The company nudged up its offer for rival real estate company Deutsche Wohnen SE to about 19.1 billion euros ($22.7 billion).

Heineken, the world’s second-largest brewer, has also risen after reporting strong earnings for the first half of the year.

Meanwhile, Allianz has slumped. The German insurer said earnings could be materially hurt by a U.S. Justice Department investigation into its Structured Alpha Funds that have been linked to investor losses during the coronavirus-related market downturn early last year.

U.S. Economic Reports

The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of July at 10 am ET. The manufacturing PMI is expected to inch up to 60.9 in July from 60.6 in June, with a reading above 50 indicating growth in the sector.

Also at 10 am ET, the Commerce Department is due to release its report on construction spending in the month of June. Construction spending is expected to rise by 0.4 percent in June after falling by 0.3 percent in May.

Stocks In Focus

Coronavius vaccine makers Pfizer (PFE) and Moderna (MRNA) are moving higher in pre-market trading after a report from the Financial Times said both companies raised the prices of their vaccines in their latest European Union supply contracts.

Solar power company First Solar (FSLR) is also likely to see initial strength after Susquehanna Financial upgraded their rating on the company’s stock to Positive from Neutral.

On the other hand, shares of Square (SQ) may come under pressure after announcing an agreement to acquire Australia’s Afterpay for about $29 billion in stock.