U.S. Stocks May Lack Direction Following Recent Strength

The major U.S. index futures are currently pointing to a mixed open on Monday, with stocks likely to show a lack of direction following recent strength.

Some buying interest may be generated in reaction to news that the House of Representatives has passed a $1 trillion infrastructure bill.

The bill, which was approved in a largely party-line 228-206 vote late Friday, now heads to President Joe Biden’s desk for his signature.

However, traders may be reluctant to make significant moves amid some uncertainty about the near-term outlook for the markets following the recent upward trend.

A lack of major U.S. economic data may also keep some traders on the sidelines ahead of the release of reports on producer and consumer prices and consumer sentiment in the coming days.

Stocks fluctuated after an early move to the upside during trading on Friday but managed to remain mostly positive throughout the session. The major averages extended a recent upward trend, reaching new record closing highs.

The major averages all finished the day in positive territory. The Dow climbed 203.72 points or 0.6 percent to 36,327.95, the Nasdaq edged up 31.28 points or 0.2 percent to 15,971.59 and the S&P 500 rose 17.47 points or 0.4 percent to 4,697.53.

For the week, the tech-heavy Nasdaq spiked by 3.1 percent, the S&P 500 surged up by 2 percent and the Dow jumped by 1.4 percent.

The continued strength on Wall Street came after the Labor Department released a report showing U.S. employment increased by more than expected in the month of October.

The report said non-farm payroll employment surged up by 531,000 jobs in October after climbing by an upwardly revised 312,000 jobs in September.

Economists had expected employment to jump by 425,000 jobs compared to the addition of 194,000 jobs originally reported for the previous month.

With employment increasing by more than expected, the unemployment rate fell to 4.6 percent in October from 4.8 percent in September, hitting its lowest level since March of 2020. The unemployment rate was expected to edge down to 4.7 percent.

The Labor Department described the job growth as widespread, with notable job gains in leisure and hospitality, professional and business services, manufacturing, and transportation and warehousing.

The upbeat jobs data added to optimism about the outlook for the economy despite lingering concerns about supply chain issues and rising inflation.

Stocks also continued to benefit from recent upward momentum, which has lifted the major averages to record highs on largely upbeat earnings news.

Signals the Federal Reserve is not in a hurry to raise interests also continued to generate buying interest even as the central bank begins scaling back its asset purchases.

Gold stocks moved sharply higher over the course of the trading session, driving the NYSE Arca Gold Bugs Index up by 3.2 percent.

The rally by gold stocks came as the price of the precious extended the spike seen in the previous session.

Significant strength was also visible among housing stocks, as reflected by the 1.8 percent gain posted by the Philadelphia Housing Sector Index. The index ended the session at its best closing level in two months.

Oil, natural gas, and semiconductor stocks also saw notable strength on the day, while biotechnology stocks showed a substantial move to the downside.

Commodity, Currency Markets

Crude oil futures are rising $0.47 to $81.74 a barrel after jumping $2.46 to $81.27 a barrel last Friday. Meanwhile, after surging $23.30 to $1,816.80 an ounce in the previous session, gold futures are inching up $2.20 to $1,819 an ounce.

On the currency front, the U.S. dollar is trading at 113.31 yen versus the 113.41 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1580 compared to last Friday’s $1.1567.

Asia

Asian stocks ended mostly lower on Monday as better than expected employment data from the U.S. forced investors to reset rate hike expectations.

Chinese stocks ended a tad higher after exports data for October beat forecasts despite global supply chain disruptions.

Exports rose 27.1 percent in dollar terms last month from a year earlier, official data showed Sunday. That marked the 13th straight month of double-digit growth and exceeded economists’ expectations of a 22.8 percent gain. Imports increased 20.6 percent, leaving a trade surplus of $84.54 billion.

The benchmark Shanghai Composite Index inched up 7.06 points, or 0.2 percent, to 3,498.63, while Hong Kong’s Hang Seng Index ended down 106.74 points, or 0.4 percent, at 24,763.77.

Japanese shares ended in the red despite the new government unveiling a spending plan to revive the economy from the coronavirus pandemic.

The Nikkei 225 Index slipped 104.52 points, or 0.4 percent, to finish at 29,507.05 as investors looked ahead to a slew of quarterly earnings results due this week. The broader Topix ended 0.3 percent lower at 2,035.22.

SoftBank Group ended 0.8 percent lower ahead of its earnings release later in the day. Nissan Motor edged up slightly ahead of its earnings results due on Tuesday, while Tokyo Electron, which unveils its results on Friday, advanced 1.3 percent.

Internet firm Mixi slumped 18.2 percent and robot maker Daifuku plunged 7.7 percent on disappointing earnings news. Precision machine maker Olympus soared 6 percent on robust earnings.

Australian markets ended marginally lower, dragged down by healthcare and tech stocks. Healthcare stocks succumbed to profit taking after gaining sharply last week.

Resmed lost 2.3 percent and Polynovo slumped as much as 9.7 percent. In the tech sector, Xero tumbled 4.9 percent.

Mining giant BHP rose 0.8 percent after it signed a deal to sell its stake in metallurgical coal unit to Stanmore Resources. Sydney Airport shares surged 2.8 percent.

Energy stocks such as Woodside Petroleum and Santos climbed about 3 percent each as oil advanced above $82 a barrel on the back of positive signs for global growth.

Seoul stocks fell for a second straight session, with financial, bio and tech stocks leading losses. The Kospi slipped 9.07 points, or 0.3 percent, to settle at 2,960.20 amid foreign and institutional selling.

Europe

European stocks have struggled for direction on Monday after having hit record highs last week in response to promising news on Pfizer’s Covid-19 pill and the upbeat U.S. jobs report.

Adding to investor optimism over the economic recovery, a survey showed earlier today that investor morale in the euro zone rose in November for the first time since July.

Sentix’s index for the euro zone rose to 18.3 from 16.9 in October despite supply bottlenecks and concerns around high inflation.

While the French CAC 40 Index is up by 0.3 percent, the U.K.’s FTSE 100 Index is down by 0.1 percent and the German DAX Index is down by 0.2 percent.

European Central Bank chief economist Philip Lane said in an interview with a Spanish newspaper published today that surging inflation across the euro zone is a passing problem and not “chronic.”

“This period of inflation is very unusual and temporary, and not a sign of a chronic situation,” Lane told El País hours before the region’s finance ministers gather in Brussels to discuss rising cost of living.

Sirius Real Estate shares have tumbled in London. The industrial property company has agreed to acquire Helix Investments Limited, the holding company of the Bizspace business, from Värde Partners for a cash consideration of approximately 245 million pounds.

Henkel has also slumped. The German chemicals company expects FY21 earnings to be at the lower end of the guidance range.

On the other hand, online gambling firm Playtech has rallied after it received a takeover bid from its second-biggest shareholder.

Miner Antofagasta and Glencore have also risen after data showed China’s exports remained strong in October.

U.S. Economic Reports

Federal Reserve Vice Chair Richard Clarida is scheduled to participate in a virtual Taking Stock of New Fed and ECB Monetary Policy Frameworks panel hosted by the Brookings Institution at 9 am ET.

At 10 am ET, Boston Federal Reserve President Kenneth Montgomery is due to give welcome remarks before a virtual The Implications of High Leverage for Financial Instability Risk, Real Economic Activity, and Appropriate Policy Responses conference.

Federal Reserve Chair Jerome Powell is scheduled to give opening remarks before a virtual Gender and the Economy Conference at 10:30 am ET.

At 12 pm ET, Philadelphia Federal Reserve President Patrick Harker is due to speak on the economic outlook before a virtual event host by the Economic Club of New York.

The Treasury Department is scheduled to announce the results of this month’s auction of $56 billion worth of three-year notes at 1 pm ET.

At 1:50 pm ET, Chicago Federal Reserve President Charles Evans is due to speak on current economic conditions and monetary policy before the OESA 2021 Automotive Supplier Conference: Beyond Disruption.