U.S. Stocks Indexes May Move In Opposite Directions

The major U.S. index futures are currently pointing to a mixed open on Monday, as the Dow futures are moving higher but the Nasdaq 100 futures are moving lower.

Cyclical stocks may benefit from easing concerns about the Omicron variant of the coronavirus amid indications the new strain causes milder symptoms.

President Joe Biden’s chief medical adviser Dr. Anthony Fauci told CNN it is too early to make definitive statements but said early signals regarding the severity of Omicron are “encouraging.”

Fauci also expressed optimism the Biden administration could lift travel restrictions on several African nations in a “reasonable period of time.”

Meanwhile, technology stocks may extend the sell-off seen in the previous session due to concerns about the Federal Reserve accelerating the pace of reductions to its asset purchase program.

Reports suggest the Fed could decide to double the pace of tapering to $30 billion per month as early as its monetary policy meeting next week.

Overall trading activity may be somewhat subdued, however, as a lack of major U.S. economic data keeps some traders on the sidelines.

Reports on the U.S. trade deficit, weekly jobless claims, consumer prices and consumer sentiment are likely to attract attention in the coming days.

Following the rally seen on Thursday, stocks moved back to the downside during trading on Friday. The tech-heavy Nasdaq showed a particularly steep drop, tumbling to its lowest closing level in well over a month.

The Nasdaq plunged 295.85 points or 1.9 percent to 15,085.47 and the S&P 500 slid 38.67 points or 0.8 percent to 4,538.43, while the narrower Dow climbed well off its worst levels but still closed down 59.71 points or 0.2 percent at 34,580.08.

The major averages went on a rollercoaster ride over the course of the week before finish notably lower. While the Nasdaq plummeted by 2.6 percent, the S&P 500 slumped by 1.2 percent and the Dow fell by 0.9 percent.

The pullback on Wall Street extended the volatility seen throughout the week, with stocks showing wild swings back and forth in reaction to the latest news about the Omicron variant of the coronavirus.

After the first confirmed omicron case in the U.S. earlier in the week, the new variant has now been detected in at least five states.

Traders were also reacting to a closely watched report from the Labor Department showing much weaker than expected U.S. job growth in the month of November.

The report said non-farm payroll employment rose by 210,000 jobs in November after surging by an upwardly revised 546,000 jobs in October.

Economists had expected employment to spike by 550,000 jobs compared to the jump of 531,000 jobs originally reported for the previous month.

Despite the much weaker than expected job growth, the unemployment rate slid to 4.2 percent in November from 4.6 percent in October. Economists had expected the unemployment rate to edge down to 4.5 percent.

With the much bigger than expected decrease, the unemployment rate fell to its lowest level since hitting 3.5 percent in February of 2020.

While the disappointing job growth has raised some concerns about the economic outlook amid the emergence of the Omicron variant, economists do not expect the data to dissuade from the Federal Reserve from accelerating the tapering of its asset purchases.

“‘Yes’ the jobs report is strong enough for the Fed to announce a likely doubling of the pace of QE asset purchase tapering,” said Gregory Daco, Chief U.S. Economist at Oxford Economics.

He added, “The Fed’s pivot is aimed at providing hawkish forward guidance while clearing the runway for rate hikes anytime after March 2022.”

Meanwhile, a separate report from the Institute for Supply Management showed an unexpected acceleration in the pace of growth in U.S. service sector activity in the month of November.

The ISM said its services PMI rose to a record high 69.1 in November from 66.7 in October, with a reading above 50 indicating growth in the sector. The increase surprised economists, who had expected the index to dip to 65.0.

Software stocks turned in some of the market’s worst performances on the day, dragging to the Dow Jones U.S. Software Index down by 2.6 percent to its lowest closing level in well over a month.

DocuSign (DOCU) posted a steep loss after the e-signature company reported fiscal third quarter results that beat expectations but provided disappointing revenue guidance.

Considerable weakness was also visible among banking stocks, as reflected by the 2.5 percent nosedive by the KBW Bank Index.

Biotechnology stocks also saw significant weakness on the day, with the NYSE Arca Biotechnology Index slumping by 1.9 percent to a one-year closing low.

Airline, brokerage and tobacco stocks also showed notable moves to the downside on the day, while utilities and gold stocks moved higher over the course of the session.

Commodity, Currency Markets

Crude oil futures are spiking $2.10 to $68.35 a barrel after slipping $0.24 to $66.26 a barrel last Friday. Meanwhile, after surging $21.20 to $1,783.90 an ounce in the previous session, gold futures are edging down $2.50 to $1,781.40 an ounce.

On the currency front, the U.S. dollar is trading at 113.15 yen versus the 112.80 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $11296 compared to last Friday’s $1.1315.

Asia

Asian stocks fell broadly on Monday as lingering worries over a U.S. rate hike offset investor optimism that the Omicron coronavirus variant might not have as much of an impact on the global economy as feared.

Chinese shares ended lower as concerns over the fallout from a likely default by China Evergrande Group overshadowed Premier Li Keqiang’s comments on a reduction in reserve requirement ratios.

The benchmark Shanghai Composite Index dropped 18.13 points, or 0.5 percent, to 3,589.31, with semiconductor and new energy shares pacing the declines.

Hong Kong’s Hang Seng Index tumbled 417.31 points, or 1.8 percent, to 23,349.38 ahead of a slew of Chinese data due on Wednesday.

Japanese shares ended off their day’s lows after initial Omicron reports detailed mild illness and asymptomatic cases. The Nikkei 225 Index ended down 102.20 points, or 0.4 percent, at 27,927.37 after losing as much as 1.2 percent earlier in the session. The broader Topix closed 0.5 percent lower at 1,947.54.

Heavyweight SoftBank Group slumped 8.2 percent to extend recent losses on concerns over valuations of key companies in its portfolio.

Australian markets ended on a flat note ahead of the RBA meeting on Tuesday, with economists expecting the central bank to hold its cash rate at a record-low 0.1 percent.

The benchmark S&P/ASX 200 Index finished marginally higher, while the All Ordinaries index slipped 0.2 percent to 7,529 amid firmer Treasury yields and worries over rising Covid-19 cases in Sydney and other cities.

Energy and gold stocks advanced, underpinned by firmer bullion and oil prices. Technology stocks fell, with aerial imagery firm Nearmap plunging more than 7 percent to end at its lowest since April 2020.

Afterpay tumbled 4.3 percent to close at a six-month low and Zip Co plummeted over 10 percent to reach its lowest level in more than 18 months. Mining heavyweights BHP and Rio Tinto ended down 1.6 percent and 1.8 percent, respectively.

Seoul stocks extended gains for the fourth straight session, though the upside remained capped by fears from China’s Evergrande and Fed rate hike woes. The Kospi inched up 4.92 points, or 0.2 percent, to 2,973.25, led by gains in tech and auto stocks.

Europe

European stocks are moving higher on Monday, as worries about the Omicron coronavirus variant eased, with a South African health official saying that the variant caused mild infections.

Elsewhere, top U.S. infectious disease official Anthony Fauci told CNN that scientists need more information before drawing conclusions about Omicron’s severity.

Chinese Premier Li Keqiang’s comments on a reduction in reserve requirement ratios have also helped underpin investor sentiment.

While the German DAX Index has advanced by 0.7 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both jumping by 1.1 percent.

Energy stocks are among the biggest gainers after top exporter Saudi Arabia hiked prices for crude sold to Asia and the United States.

Shipping firm Clarkson has also shown a substantial move to the upside after raising its annual profit outlook.

Victrex, a supplier of polymers, has also rallied after its pretax profit and revenue increased for fiscal 2021.

Plane maker Airbus SE has also rsien in Paris. The company announced that The Helicopter Company, the first and only helicopter services provider in Saudi Arabia, has signed a second purchase agreement with Airbus Helicopters.

Construction materials company Saint-Gobain has also moved higher after announcing it would buy U.S.-based GCP Applied Technologies in a deal valued at around $2.3 billion.

Meanwhile, online food ordering company Just Eat Takeaway.com has come under pressure after Bernstein downgraded its rating on the stock.

In economic news, German factory orders declined sharply in October, data released by Destatis showed earlier in the day.

Factory orders decreased 6.9 percent month-on-month in October, reversing a 1.8 percent increase in September. Economists had forecast a moderate fall of 0.5 percent.

On a yearly basis, factory orders dropped 1 percent, in contrast to the 10.3 percent spike a month ago.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today.

Stocks In Focus

Shares of GCP Applied Technologies (GCP) are moving sharply higher in pre-market trading after the specialty construction chemicals maker agreed to be acquired by Saint-Gobain in a transaction valued at approximately $2.3 billion.

Department store operator Kohl’s (KSS) may also see initial strength after long-term shareholder Engine Capital urged the company’s board to consider strategic alternatives, including a separation of its e-commerce business and a sale of the company.

On the other hand, shares of Lucid Group (LCID) are likely to see initial weakness after the electric vehicle maker received a subpoena from the Securities and Exchange Commission requesting documents related to an investigation of its July merger with Churchill Capital.