Futures Pointing To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to add to the strong gains posted last week.

The markets may benefit from recent upward momentum, which has helped lift the major averages to new record highs.

A batch of upbeat earnings news has contributed to the upward trend, as most major companies have reported better than expected quarterly results.

Trading activity may be somewhat subdued, however, as traders look ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

The Fed is likely to leave interest rates unchanged but could announce plans to begin scaling back its asset purchase program.

Stocks showed a significant turnaround over the course of the trading session on Friday, recovering from an early move to the downside to end the day mostly higher. The rebound on the day lifted the major averages to new record closing highs.

The major averages ended the day just off their highs of the session. The Dow rose 89.08 points or 0.3 percent to 35,819.56, the Nasdaq climbed 50.27 points or 0.3 percent to 15,498.39 and the S&P 500 edged up 8.96 points or 0.2 percent to 4,605.38.

For the week, the tech-heavy Nasdaq surged up by 2.7 percent, the S&P 500 jumped by 1.3 percent and the Dow rose by 0.4 percent.

A negative reaction to quarterly results from tech giants Apple (AAPL) and Amazon (AMZN) contributed to the early weakness on Wall Street.

Shares of Apple climbed off their worst levels but closed notably lower after the iPhone maker reported fiscal fourth quarter earnings that matched analyst estimates but weaker than expected sales amid supply chain issues.

Online retail giant Amazon also ended the day in negative territory after reporting much weaker than expected third quarter results.

Selling pressure waned over the course of the session, however, as traders seemed reluctant to make significant bets ahead of the Fed’s monetary policy meeting.

On the U.S. economic front, a report released by the Commerce Department showed personal income decreased by much more than expected in the month of September.

The Commerce Department said personal income slumped by 1.0 percent in September after inching up by 0.2 percent in August. Economists had expected personal income to edge down by 0.2 percent.

The bigger than expected drop in personal income primarily reflected a decrease in government social benefits, both in unemployment benefits and “other” benefits.

Meanwhile, the report showed personal spending climbed by 0.6 percent in September after jumping by an upwardly revised 1.0 percent in August.

Economists had expected personal spending to rise by 0.5 percent compared to the 0.8 percent increase originally reported for the previous month.

A separate report from the University of Michigan showed consumer sentiment in the U.S. deteriorated by slightly less than initially estimated in the month of October.

The report said the consumer sentiment index for October was upwardly revised to 71.7 from the preliminary reading of 71.4.

While the upward revision surprised economists, who expected the index to be unrevised, the final reading was still below September’s 72.8.

Despite the turnaround by the broader markets, substantial weakness remained visible among gold stocks, as reflected by the 2.9 percent nosedive by the NYSE Arca Gold Bugs Index. The sell-off by gold stocks came amid a steep drop by the price of the precious metal.

Oil service stocks also saw considerable weakness despite an increase by the price of crude oil, resulting in a 2.9 percent slump by the Philadelphia Oil Service Index.

Natural gas, tobacco and computer hardware stocks also showed notable moves to the downside, while strength emerged among software and pharmaceutical stocks.

Commodity, Currency Markets

Crude oil futures are rising $0.51 to $84.08 a barrel after climbing $0.76 to $83.57 a barrel last Friday. Meanwhile, after tumbling $18.70 to $1,783.90 an ounce in the previous session, gold futures are up $6.30 at $1,790.20 an ounce.

On the currency front, the U.S. dollar is trading at 114.16 yen versus the 113.95 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1573 compared to last Friday’s $1.1558.

Asia

Asian stocks turned in a mixed performance on Monday as Chinese data proved to be a mixed bag and investors avoided big bets ahead of the Federal Reserve’s monetary policy meeting this week.

China’s official manufacturing Purchasing Manager’s Index (PMI) dropped to 49.2 from 49.6 in September, shrinking for a second month due to higher raw material prices and softer domestic demand.

However, a private survey showed Chinese manufacturing activity growth in October expanded, with the Caixin/Markit manufacturing PMI coming in at 50.6.

China’s Shanghai Composite Index finished marginally lower at 3,544.48 amid fears that travel restrictions could be tightened in coming weeks ahead of the upcoming Spring Festival travel rush. Hong Kong’s Hang Seng Index fell 222.92 points, or 0.9 percent, to 25,154.32.

Japanese shares rallied to reach a one-month high after Prime Minister Fumio Kishida’s Liberal Democratic Party held on to power comfortably, paving the way for further fiscal stimulus measures.

“I want to make full use of this both in running the government and running parliament,” Kishida told a press conference.

Investors also cheered data showing that the manufacturing sector in Japan expanded at a faster pace in October.

The Nikkei 225 Index surged 754.39 points, or 2.6 percent, to settle at 29,647.08, while the broader Topix ended 2.2 percent higher at 2,044.72.

Market heavyweight SoftBank advanced 2.7 percent and Uniqlo operator Fast Retailing soared 4.2 percent. Automakers Toyota Motor, Nissan, Mazda Motor and Honda Motor climbed 2-4 percent on the back of a weaker yen.

Australian markets rose notably after the government eased curbs on international travel. The benchmark S&P/ASX 200 Index rose 47.10 points, or 0.6 percent, to 7,370.80 ahead of the Reserve Bank of Australia’s monthly policy meeting on Tuesday. The broader All Ordinaries index ended up 53.10 points, or 0.7 percent, at 7,692.20.

Travel and tourism stocks rallied, with Webjet and Qantas rising 2-3 percent as the country allowed some of its vaccinated public to travel freely after more than 18 months.

Tech stocks followed their U.S. peers higher, with WiseTech Global surging as much as 5.5 percent. Lender Westpac slumped 7.4 percent after the lender delivered a smaller share buyback than many had expected.

Seoul stocks eked out modest gains to snap a three-day losing streak after exports showed posted solid gains to expand for a 12th consecutive month in October but a measure of factory activity growth hit a 13-month low in the month.

The benchmark Kospi inched up 8.26 points, or 0.3 percent, to close at 2,978.94. Chipmaker SK Hynix jumped 3.4 percent despite a drop in DRAM prices.

Europe

European stocks have moved notably notably on Monday, with earnings optimism, the ruling party’s solid victory in Japan’s parliamentary election, easing travel curbs in Australia and Thailand, and stabilizing coal prices in China boosting sentiment.

Monetary policy tightening remains the key market focus, with investors now looking ahead to the Federal Reserve announcement on Wednesday for clues on the timing of its first interest rate hike since December 2018.

Fed Chair Jerome Powell has already acknowledged substantial further progress on inflation (price stability) and maximum employment for QE tapering.

On Thursday, attention turns to the Bank of England policy meeting. Market participants are pricing in a rate hike to curb inflation but economists narrowly predict no change.

While the U.K.’s FTSE 100 Index is up by 0.3 percent, the German DAX Index and the French CAC 40 Index are up by 0.7 percent and 0.8 percent, respectively.

Swiss drug major Novartis has risen. The U.S. Food and Drug Administration approved Scemblix (asciminib) for the treatment of chronic myeloid leukemia in two distinct indications.

French pharmaceutical company Sanofi has also moved to the downsideafter HSBC upgraded the stock to “buy.”

Commercial landlord Land Securities is marginally higher in London after it agreed to buy property regeneration company U&I Group in a £190m deal. Shares of the latter jumped as much as 72 percent.

German automaker Volkswagen has also moved higher amid reports that Skoda Auto is resuming production following a two-week outage caused by a shortage of semiconductor chips.

On the other hand, Danish jewelry maker Pandora has slumped despite lifting its 2021 outlook.

Barclays has also declined. The lender said that its chief executive Jes Staley will step down following U.K. regulators’ investigations into his relationship with U.S. Financier and convicted sex offender Jeffrey Epstein, who committed suicide in U.S. jail in 2019.

In economic news, investors shrugged off data showing that Germany’s retail sales declined unexpectedly in September.

Germany’s retail turnover decreased 2.5 percent month-on-month in September, reversing a 1.2 percent rise in August, Destatis reported. Economists had forecast a monthly growth of 0.6 percent.

On a yearly basis, retail sales declined 0.7 percent, in contrast to the 0.9 percent increase in the previous month. Sales were forecast to advance 1.8 percent.

U.S. Economic Reports

The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of October at 10 am ET.

The ISM’s manufacturing PMI is expected to edge down to 60.4 in October from 61.1 in September, although a reading above 50 would still indicate growth.

Also at 10 am ET, the Commerce Department is due to release its report on construction spending in the month of September. Construction spending is expected to increase by 0.5 percent.