Upbeat Retail Earnings, Data May Lead To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Tuesday, with stocks likely to see initial strength after ending the previous session roughly flat.

The Dow may benefit from early strength among shares of retail giants Walmart (WMT) and Home Depot (HD), which are both components of the blue chip index.

Walmart may see initial strength after reporting third quarter results that exceeded analyst estimates and raising its full-year guidance.

Shares of Home Depot are also likely to move to the upside after the home improvement retailer reported better than expected third quarter results.

Adding to the positive sentiment on Wall Street, the Commerce Department released a report showing U.S. retail sales shot up by more than expected in the month of October.

After failing to sustain an early move to the upside, stocks showed a lack of direction over the course of the trading session on Monday. The major averages bounced back and forth across the unchanged line before ending the day roughly flat.

The major averages finished the day slightly lower, edging down by less than a tenth of a percent each. The Dow slipped 12.86 points to 36,087.45, the Nasdaq dipped 7.11 points to 15,853.85 and the S&P 500 edged down 0.05 points to 4,682.80.

The choppy trading on Wall Street came as traders expressed some uncertainty about the near-term outlook for the markets.

Upbeat Chinese economic data generated some buying interest, although concerns about inflation continued to weigh on investors’ minds after last week’s report showing consumer prices increased at their fastest annual rate in over thirty years in October.

The elevated pace of inflation has led to worries that the Federal Reserve might be forced to accelerate its plans to begin tightening monetary policy.

However, the Fed has repeatedly described the factors driving inflation as “transitory” and signaled that it will not be in a hurry to start raising interest rates.

In U.S. economic news, the New York Federal Reserve released a report showing New York manufacturing activity grew strongly in the month of November.

The New York Fed said its general business conditions index jumped to 30.9 in November from 19.8 in October, with a positive reading indicating growth. Economists had expected the index to rise to 21.6.

Meanwhile, the report said firms were less optimistic about the six-month outlook than they were last month, with the index for future business conditions tumbling to 36.9 in November from 52.0 in October.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Tobacco stocks showed a substantial move to the upside, however, with the NYSE Arca Tobacco Index surging up by 2.4 percent.

Significant strength was also visible among utilities stocks, as reflected by the 1.3 percent drop by the Dow Jones Utilities Average.

On the other hand, steel stocks saw considerable weakness on the day, resulting in a 1.7 percent slump by the NYSE Arca Steel Index.

Oil service stocks also showed a notable move to the downside, dragging the Philadelphia Oil Service Index down by 1.2 percent.

Commodity, Currency Markets

Crude oil futures are climbing $0.47 to $81.35 a barrel after inching up $0.09 to $80.88 a barrel on Monday. Meanwhile, after edging down $1.90 to $1,866.60 an ounce in the previous session, gold futures are rising $5.80 to $1,872.40 an ounce.

On the currency front, the U.S. dollar is trading at 114.33 yen compared to the 114.12 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1367 compared to yesterday’s $1.1368.

Asia

Asian stocks ended mixed on Tuesday as a virtual meeting between U.S. President Joe Biden and Chinese President Xi Jinping, the closest communication between the two leaders since Biden took office in January, produced no major breakthrough on relations nor agreements to ease tensions.

Traders also awaited speeches by a number of Federal Reserve officials this week for additional clues on interest rates and monetary policy going forward.

Chinese shares ended a tad lower as the country battled its biggest COVID-19 outbreak caused by the highly transmissible Delta variant. The benchmark Shanghai Composite Index fell 11.52 points, or 0.3 percent, to 3,521.79.

Hong Kong’s Hang Seng Index rallied 322.87 points, or 1.3 percent, to 25,713.78 amid policy easing bets as authorities in several mainland provinces appear to have relaxed rules to spur home sales.

Razer shares soared 11.5 percent after reports that executives at the gaming hardware firm are leading a consortium plan to value the company at up to 35 billion Hong Kong dollars (about $4.49 billion).

Japanese shares ended marginally higher amid a lack of major catalysts. The Nikkei 225 Index edged up 31.32 points, or 0.1 percent, to 29,808.12, while the broader Topix ended 0.1 percent higher at 2,050.83.

Automakers were in focus, with Subaru climbing 5.2 percent after JPMorgan Securities raised its rating and price target on the stock. Toyota Motor advanced 1.9 percent after announcing last week that it began making up for production lost from supply shortages in December.

Insurers T&D Holdings and Dai-ichi Life Holdings rose 2.6 percent and 1.7 percent, respectively as U.S. Treasury yields gained.

Australian markets fell notably as the central bank talked down the threat of rate hikes in 2022 despite inflation uncertainty.

The benchmark S&P/ASX 200 Index dropped 49.70 points, or 0.7 percent, to 7,420.40, while the broader All Ordinaries Index ended down 51.10 points, or 0.7 percent, at 7,747.10.

Miners and banks succumbed to selling pressure, while tech stocks outperformed. Rio Tinto, BHP, Iluka Resources and Mount Gibson Iron tumbled 2-6 percent as iron ore prices continued to soften.

Seoul stocks fluctuated before ending on a flat note as a virtual summit between the presidents of the United States and China ended with a pledge to improve cooperation. The Kospi slipped 2.31 points to close at 2,997.21.

Automaker Hyundai Motor declined 1.2 percent and its smaller affiliate Kia Corp gave up 2.7 percent, while leading chemical firm LG Chem climbed 1.6 percent.

Europe

European stocks are broadly higher on Tuesday after a key virtual summit between U.S. President Joe Biden and Chinese leader Xi Jinping saw both sides signaling a stabilization in the fraught relationship. However, there was no breakthrough on issues concerning both nations.

While the U.K.’s FTSE 100 Index has buck the uptrend and edged down by 0.1 percent, the French CAC 40 Index and the German DAX Index are up by 0.4 percent and 0.5 percent, respectively.

The euro is lingering near a 16-month low after European Central Bank President Christine Lagarde doubled down on her assessment that euro-area inflation will ease and conditions for a rate hike in 2022 are “very unlikely” to be met.

The British pound has risen against its major counterparts as the nation’s employment rose in the third quarter, easing worries about the labor market and fueling hopes for a rate hike by the Bank of England in December.

Data from the Office for National Statistics showed that the employment rate increased 0.4 percentage points to 75.4 percent.

The unemployment rate decreased 0.5 percentage points on the quarter to 4.3 percent. The expected rate was 4.4 percent.

Vodafone has jumped in London. The telecom giant raised its forecast for this year’s free cash flow after reporting strong half-yearly performance.

Shares of Diageo have also rallied. The beverage company said that it expects to grow its organic operating profit by 6-9 percent for fiscal 2023 to fiscal 2025.

Dutch tech investor Prosus NV has also shown a notable move to the upside after forecasting higher profits for the first half of 2022.

Nordex Group shares have also advanced. The German company said it has received an order from Enerjisa Üretim, an independent power plant operator in Turkey, to supply and install twelve N163/5.X turbines for the 68.4 MW Erciyes wind farm.

Meanwhile, Premier Foods has slumped after the food manufacturer reported a decrease in pretax profit in the first half of fiscal 2022.

Bouygues SA has also declined in Paris. The telecommunications, media, and construction company reiterated its outlook after reporting a surge in its nine-month net profit.

U.S. Economic Reports

Retail sales in the U.S. shot up by more than expected in the month of October, according to a report released by the Commerce Department on Tuesday.

The report said retail sales spiked by 1.7 percent in October after climbing by an upwardly revised 0.8 percent in September.

Economists had expected retail sales to jump by 1.4 percent compared to the 0.7 percent increase originally reported for the previous month.

Excluding sales by motor vehicles and parts dealers, retail sales still surged up by 1.7 percent in October after rising by 0.7 percent in September. Ex-auto sales were expected to advance by 1.0 percent.

Meanwhile, a separate report released by the Labor Department showed U.S. import prices jumped by more than expected in the month of October.

The Labor Department said import prices shot up by 1.2 percent in October after rising by 0.4 percent in September. Economists had expected import prices to increase by 1.0 percent.

The report showed export prices also surged by 1.5 percent in October after climbing by an upwardly revised 0.4 percent in September.

Export prices were expected to advance by 0.9 percent compared to the 0.1 percent uptick originally reported for the previous month.

At 9:15 am ET, the Federal Reserve is scheduled to release its report on industrial production in the month of October. Industrial production is expected to climb by 0.7 percent in October after slumping by 1.3 percent in September.

The National Association of Home Builders is due to release its report on homebuilder confidence in the month of November at 10 am ET. The housing market index is expected to come in unchanged at 80.

Also at 10 am ET, the Commerce Department is scheduled to release its report on business inventories in the month of September. Business inventories are expected to increase by 0.7 percent.

Atlanta Federal Reserve President Raphael Bosticis due to participate virtually in a panel before the Federal Reserve Racism and the Economy: Focus on Financial Services event at 12 pm ET.

At 2:55 pm ET, Philadelphia Federal Reserve President Patrick Harker is scheduled to speak virtually on Fintech and Financial Inclusion before the Federal Reserve Bank of Philadelphia Fifth Annual Fintech Conference.

San Francisco Federal Reserve President Mary Daly is due to speak before a Commonwealth Club, San Francisco hybrid event at 3 pm ET.

Stocks In Focus

Shares of Axon Enterprise (AXON) are moving sharply higher in pre-market trading after the public safety equipment maker reported much better than expected third quarter results and provided upbeat guidance.

Cloud computing company Rackspace Technology (RXT) is also likely to see initial strength after reporting third quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of Workday (DAY) may also move to the upside after UBS upgraded its rating on the human resources software company’s stock to Buy from Neutral.