Easing Omicron Concerns May Lead To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a sharply higher open on Tuesday, with stocks likely to extend the strong upward move seen in the previous session.

Easing concerns about the impact of the Omicron variant of the coronavirus may contribute to continued strength on Wall Street.

Indications the variant causes milder symptoms has helped offset worries the new strain could derail the global economic recovery.

Uncertainty about Omicron contributed to substantial volatility in the markets last week, with the major averages hitting their lowest levels in well over a month.

With the major averages still well off their recent highs, traders may continue to use the recent weakness as an opportunity to pick up stocks at somewhat reduced levels.

Intel (INTC) may help lead an early advance on Wall Street, as the semiconductor giant is soaring by 7.2 percent in pre-market trading.

The spike by Intel comes after the company announced its intention to take its self-driving car unit Mobileye public in the United States in mid-2022 via an initial public offering.

Following the rollercoaster ride seen last week, stocks showed a strong move to the upside during trading on Monday. The major averages all moved notably higher on the day, with the Dow posting a particularly strong gain.

The major averages pulled back off their best levels in late-day trading but remained firmly positive. The Dow surged 646.95 points or 1.9 percent to 35,227.03, the Nasdaq advanced 139.68 points or 0.9 percent to 15,225.15 and the S&P 500 jumped 53.24 points or 1.2 percent to 4,591.67.

The strength on Wall Street partly reflected 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.”

The turnaround by the Nasdaq may also have been due to bargain hunting after the tech-heavy index ended last Friday’s trading at its lowest closing level in well over a month.

Meanwhile, the jump by the Dow comes amid standout gains by Walgreens Boots Alliance (WBA), Boeing (BA) and Intel (INTC).

Airline stocks skyrocketed amid easing concerns about the Omicron variant, with the NYSE Arca Airline Index soaring by 5.8 percent. The index continued to rebound after hitting its lowest levels in a year last week.

Substantial strength was also visible among oil service stocks, as reflected by the 3.7 percent spike by the Philadelphia Oil Service Index. The rally by oil service stocks came amid a surge by the price of crude oil.

Housing stocks also showed a significant move to the upside on the day, driving the Philadelphia Housing Sector Index up by 2.5 percent to its best closing level in almost seven months.

Steel, financial and telecom stocks also saw considerable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are surging $1.93 to $71.42 a barrel after spiking $3.23 to $69.49 a barrel on Monday. Meanwhile, after falling $4.40 to $1,779.50 an ounce in the previous session, gold futures are sliding $5.80 to $1,773.70 an ounce.

On the currency front, the U.S. dollar is trading at 113.68 yen compared to the 113.48 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1237 compared to yesterday’s $1.1285.

Asia

Asian stocks advanced on Tuesday after experts said the new Omicron variant of the coronavirus would not be as dangerous as Delta.

Chinese shares ended slightly higher after the People’s Bank of China released about 1.2 trillion yuan ($188 billion) of liquidity into the financial system via a cut in the reserve requirement ratio for most banks.

The upside remained capped by lingering concerns over a crisis in the country’s property sector, with reports suggesting that some offshore bondholders of China Evergrande Group did not receive coupon payments by the end of a 30-day grace period last night.

The benchmark Shanghai Composite Index edged up 5.78 points, or 0.2 percent, to 3,595.09, while Hong Kong’s Hang Seng Index surged up 634.28 points, or 2.7 percent, to 23,983.66. Alibaba Group shares spiked 12.2 percent after the company announced a management shakeup.

China’s exports grew more than expected in November, data from the General Administration of Customs showed earlier today. Exports grew 22 percent on a yearly basis in November, which was bigger than the economists’ forecast of 19 percent.

Likewise, imports advanced 31.7 percent from the last year. Economists had forecast an annual increase of 19.8 percent.

Japanese shares rose the most in over a month as easing Omicron worries helped travel-related stocks rebound. Investors shrugged off data showing that Japan’s household spending fell for the third straight month in October.

The Nikkei 225 Index jumped 528.23 points, or 1.9 percent, to 28,455.60, marking its biggest percentage gain since November 1. The broader Topix closed 2.2 percent higher at 1,989.85.

Japan Airlines, West Japan Railway, Open Door and Airtrip soared 5-8 percent following optimistic comments from a top U.S. official on the latest coronavirus variant. SoftBank Group jumped 7.9 percent on bargain hunting after a recent string of losses.

Australian markets advanced after the country’s central bank left its key interest rate and bond purchase program unchanged but adjusted its policy statement to allow for a possible increase before 2023.

The benchmark S&P/ASX 200 Index climbed 68.80 points, or 1 percent, to 7,313.90, while the broader All Ordinaries Index ended up 76.20 points, or 1 percent, at 7,605.20.

Energy and travel-related stocks topped the gainers list as oil prices soared overnight and Omicron fears somewhat subsided. Papua New Guinea-focused Oil Search rallied 3.5 percent after shareholders gave the green light for its merger with fellow petroleum and gas company Santos.

Seoul stocks rose for the fifth straight session, with tech and auto shares rising on hopes that the Omicron coronavirus variant may be mild.

The Kospi gained 18.47 points, or 0.6 percent, to close at 2,991.72, marking the highest level since November 24. Tech heavyweights Samsung Electronics and SK Hynix climbed 1.4 percent and 2.5 percent, respectively.

Samsung Electronics said today it would merge its mobile and consumer electronics divisions and named new co-CEOs in its biggest reshuffle since 2017 to simplify its structure and focus on growing its logic chip business.

Europe

European stocks have moved sharply higher on Tuesday, as Omicron fears have eased and the People’s Bank of China released about 1.2 trillion yuan ($188 billion) of liquidity into the financial system via a cut in the reserve requirement ratio for most banks.

Sentiment was also boosted after data showed German industrial production recovered at a faster than expected pace in October.

Industrial production grew 2.8 percent on a monthly basis in October, reversing a 0.5 percent drop in September, Destatis reported. Production was forecast to grow 0.8 percent.

While the U.K.’s FTSE 100 Index has jumped by 1.2 percent, the German DAX Index and the French CAC 40 Index are up by 2.1 percent and 2.3 percent, respectively.

Crimson Tide jumped has spiked. The provider of the mpro5 solution announced that it has entered into a Master Services Agreement with food service company Compass Group for its non-U.K. based operations.

Equipment rental firm Ashtead Group has also shown a strong move to the upside after boosting its expectations for the full year.

British American Tobacco has also moved notably higher after reaffirming its full-year profit and sales forecasts.

Worldline has also advanced as Eurobank, one of Greece’s four largest lenders, agreed to sell 80 percent of its merchant acquiring business to the French payments firm.

Symrise AG has also risen. The supplier of fragrances, flavors, food, nutrition and cosmetic ingredients has signed a purchase agreement for the acquisition of Giraffe Foods Inc. Based in Mississauga, Ontario, Canada.

Nordex has also jumped after it received a 47MW turbine order for a wind project in Sweden from regular customer WPD.

Swiss engineering firm ABB has also moved to the upside after unveiling higher sales and profitability targets.

Meanwhile, Veolia and Suez are declining in Paris after the CMA found that their merger could lead to a loss of competition in the supply of several waste and water management services in the U.K.

U.S. Economic Reports

The Commerce Department released a report on Tuesday showing the U.S. trade deficit narrowed significantly in the month of October amid a spike in the value of exports.

The report said the trade deficit decreased to $67.1 billion in October from a revised $81.4 billion in September. Economists had expected the deficit to narrow to $67.5 billion from the $80.9 billion originally reported for the previous month.

The narrower trade deficit came as the value of exports soared by 8.1 percent to $223.6 billion, while the value of imports climbed by 0.9 percent to $290.7 billion.

Meanwhile, labor productivity in the U.S. plunged by even more than initially estimated in the third quarter, according to revised data released by the Labor Department on Tuesday.

The Labor Department said labor productivity tumbled by 5.2 percent in the third quarter compared to the previously reported 5.0 percent nosedive. Economists had expected the slump in productivity to be revised to 4.9 percent.

Meanwhile, the report showed the spike in unit labor costs during the third quarter was upwardly revised to 9.6 percent from 8.3 percent. The surge in unit labor costs was expected to be revised to 8.4 percent.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $54 billion worth of three-year notes.

The Federal Reserve is due to release its report on consumer credit in the month of October at 3 pm ET. Consumer credit is expected to increase by $30.0 billion.

Stocks In Focus

Shares of Acadia Pharmaceuticals (ACAD) are moving sharply higher in pre-market trading after the biopharmaceutical company reported positive top-line results from a late-stage trial of its experimental treatment for Rett Syndrome.

Database platform company MongoDB (MDB) is also seeing substantial pre-market strength after reporting a narrower than expected fiscal third quarter loss on revenues that beat estimates. MongoDB also raised its full-year guidance.

Shares of Mimecast (MIME) are also likely to move to the upside after the cybersecurity company agreed to be acquired by private equity firm Permira for $80 per share in cash.

On the other hand, shares of Coupa Software (COUP) are seeing significant pre-market weakness even though the business software company reported fiscal third quarter results that exceeded analyst estimates.