Profit Taking May Lead To Initial Weakness On Wall Street

The major U.S. index futures are currently pointing to a modestly lower open on Tuesday, with stocks likely to give back ground after ending the previous session mostly higher.

Profit taking may contribute to initial weakness on Wall Street after the S&P 500 and the Nasdaq ended Monday’s trading at new record closing highs.

Selling pressure is likely to be somewhat subdued, however, as traders may worry about missing out on further upside for the markets.

Traders may also be reluctant to make significant moves ahead of the release of the Labor Department’s closely watched monthly jobs report on Friday.

Following the advance seen last Friday, stocks moved mostly higher during trading on Monday. With the upward move, the S&P 500 and the Nasdaq reached new record closing highs.

The S&P 500 rose 19.42 points or 0.4 percent to 4,528.79 and the Nasdaq climbed 136.39 points or 0.9 percent to 15,265.89. Meanwhile, the narrower Dow edged down 55.96 points or 0.2 percent to 35,399.84.

Stocks continued to benefit from recent upward momentum, which helped lift the S&P 500 and the Nasdaq to record closing highs last Friday.

Traders remain optimistic about the outlook for the markets even though the Federal Reserve has signaled it plans to begin scaling back its asset purchases later this year.

The Fed’s asset purchase program has helped prop up stocks throughout much of the coronavirus pandemic, but traders seem to believe the strength of the economy will provide continued support.

Fed Chair Jerome Powell’s comments last Friday suggesting interest rate hikes remain a long way off have also increased the appeal of stocks.

Trading activity was somewhat subdued, however, as investors looked ahead to the release of the Labor Department’s closely watched monthly jobs report on Friday.

Reports on consumer confidence, manufacturing and service sector activity, and factory orders may also attract attention in the coming days.

Computer hardware stocks showed a strong move to the upside, contributing to the advance by the tech-heavy Nasdaq, with the NYSE Arca Computer Hardware Index climbing by 1.5 percent.

Retail, commercial real estate and software stocks also moved notably higher on the day.

On the other hand, airline stocks moved sharply lower, dragging the NYSE Arca Airline Index down by 2.7 percent.

Oil service, banking and gold stocks also moved to the downside, limiting the upside for the broader markets.

Commodity, Currency Markets

Crude oil futures are sliding $0.80 to $68.41 a barrel after climbing $0.47 to $69.21 a barrel on Monday. Meanwhile, after falling $7.30 to $1,812.20 an ounce in the previous session, gold futures are inching up $1.60 to $1,813.80 an ounce.

On the currency front, the U.S. dollar is trading at 109.71 yen compared to the 109.92 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1834 compared to yesterday’s $1.1797.

Asia

Asian stocks rose on Tuesday despite concerns over surging coronavirus cases in the region and the continuing regulatory clampdown in China.

Investors ignored official data that showed China’s services industry contracted in August for the first time since the height of the pandemic early last year.

Chinese stocks recovered from an early slide to finish higher as investors weighed the impact of new regulations that tighten the time under-18s in China spend on online video games.

The benchmark Shanghai Composite Index rose 15.79 points, or 0.5 percent, to 3,543.94, while Hong Kong’s Hang Seng Index surged up 339.45 points, or 1.3 percent, to 25,878.99.

Japanese shares rose sharply to hit a three-week high after reports Prime Minister Yoshihide Suga is considering replacing the ruling party’s powerful secretary-general, Toshihiro Nikai, ahead of a party leadership election.

The Nikkei 225 Index jumped 300.25 points, or 1.1 percent, to 28,089.54, closing above the 28,000 level for the first time since August 12. The broader Topix closed 0.5 percent higher at 1,960.70.

Shippers and steel makers extended recent gains. Heavyweight SoftBank Group rose half a percent, while Uniqlo clothing store operator Fast Retailing gained 2.1 percent and chip-making equipment maker Tokyo Electron added 1.4 percent.

On the losing side, Japan Airlines dropped 1.6 percent and ANA Holdings lost 2.1 percent.

Australian markets eked out modest gains after data showed the country’s current account surplus widened to a record high in the June quarter.

The benchmark S&P/ASX 200 Index rose 30.40 points, or 0.4 percent, to 7,534.90, marking its highest close since August 16. The broader All Ordinaries Index ended up 34.70 points, or 0.5 percent, at 7,823.30.

Tech and healthcare stocks paced the gainers, while energy stocks succumbed to selling pressure, tracking a downturn in oil prices.

Biotech firm Mesoblast plunged nearly 16 percent after it revealed a loss of $US98.8 million ($134.6 million) for 2021.

Seoul stocks ended higher for the third straight day as foreign investors scooped up tech shares on expectations they will benefit from lower interest rates. The benchmark Kospi spiked 55.08 points, or 1.8 percent, to 3,199.27.

Market bellwether Samsung Electronics jumped 2.8 percent, No. 2 chipmaker SK Hynix climbed 2.9 percent and internet portal operator Naver advanced 2.6 percent.

Drug maker SK Bioscience soared 4.7 percent, a day after the company announced it began phase three clinical trials of its COVID-19 vaccine candidate.

Video game maker Krafton lost 1.1 percent after China announced new rules to curb video game addiction among children.

Europe

European stocks have moved mostly lower over the course of the session on Tuesday amid signs of a slowdown in the Chinese economy.

Official data showed that China’s services industry contracted in August for the first time since the height of the pandemic early last year.

Closer to home, the number of unemployed people in Germany declined slightly in August, while the country’s jobless rate remained steady at 5.6 percent, official statistics showed.

Consumer prices in the euro zone rose 3.0 percent year-on-year in August, the fastest rate of growth since November 2011, according to a first estimate released by Eurostat, the European Union’s statistics agency. Prices rose an annual 2.2 percent in July.

While the U.K.’s FTSE 100 Index has slid by 0.6 percent, the German DAX Index and the French CAC 40 Index are down by 0.4 percent and 0.3 percent, respectively.

Bunzl Plc has fallen after the British business supplies distributor flagged that it was facing supply chain disruptions, product shortages and a labor crunch in certain markets.

Travel-related stocks have also declined after European Union governments agreed to remove the United States from the EU’s safe travel list.

Dutch technology investor Prosus NV has surged. The company has agreed to buy Indian payments platform BillDesk for $4.7 billion.

Biotech company Medivir AB has also rallied after it received approval from the British Medicines & Healthcare products Regulatory Agency for the phase 1/2a combination study with MIV-818 against liver cancer.

Ferguson has also moved to the upside after JP Morgan raised its price target on the plumbing and heating parts distributor.

U.S. Economic Reports

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

At 9:45 am ET, MNI Indicators is due to release its report on Chicago-area business activity in the month of August.

The Chicago business barometer is expected to drop to 68.0 in August from 73.4 in July, although a reading above 50 would still indicate growth.

The Conference Board is scheduled to release its report on consumer confidence in the month of August at 10 am ET. The consumer confidence index is expected to decline to 123.0 in August from 129.1 in July.

Stocks In Focus

Shares of Designer Brands (DBI) are seeing significant pre-market strength after the footwear retailer reported fiscal second quarter results that exceeded analyst estimates.

Apparel retailer Chico’s FAS (CHS) is also likely to move to the upside after reporting second quarter results that beat expectations on both the top and bottom lines.

On the other hand, shares of Zoom (ZM) are moving sharply lower in pre-market trading even though the communications technology company reported better than expected fiscal second quarter results.