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 extend the strong upward move seen last week.

The upward momentum on Wall Street comes as traders continue to look to pick up stocks at relatively reduced levels following recent weakness.

Some traders feel the sell-off in response to monetary policy tightening around the world was overdone, offering good opportunities to hunt for bargains.

Buying interest may be somewhat subdued, however, as concerns about inflation and a potential recession continue to hang over the markets.

Stocks moved sharply higher during trading on Friday, extending the strong upward move seen going into the close of trading on Thursday. The major averages all showed substantial upward moves over the course of the session.

The major averages saw further upside in late-day trading, ending the session at their best levels of the day. The Dow jumped 823.32 points or 2.7 percent to 31,500.68, the Nasdaq surged 375.43 points or 3.3 percent to 11,607.62 and the S&P 500 shot up 116.01 points or 3.1 percent to 3,911.74.

With the extended rally, the major averages snapped a three-week losing streak. For the holiday-shortened week, the Nasdaq soared by 7.5 percent, while the S&P 500 and the Dow spiked by 6.4 percent and 5.4 percent, respectively.

Overseas strength carried over onto Wall Street, as traders continued to pick up stocks at relatively reduced levels following recent weakness.

Traders continue to express concerns about inflation, interest rates and a potential recession but may feel to sell-off earlier this month was overdone.

“Hopes that inflation is peaking and that the economy is still on solid footing has some investors confidently buying up heavily discounted stock,” said Edward Moya, senior market analyst at OANDA. “It seems Wall Street is starting to believe that even if the economy has a recession, it will be a short one.”

He added, “This could still be a bear market rally, but that might change if we get some less pessimistic outlooks from some major retailers next week.”

Adding to the positive sentiment, shares of FedEx (FDX) soared after the delivery giant narrowly missed fiscal fourth quarter earnings estimates but provided upbeat guidance for the current year.

FedEx has helped to lead a rally by transportation stocks, resulting in a 4 percent spike by the Dow Jones Transportation Average.

Oil service stocks also showed a substantial move back to the upside, with the Philadelphia Oil Service Index surging by 4.6 percent after ending the previous session at its lowest closing level in five months.

Considerable strength was also visible among semiconductor stocks, as reflected by the 4.5 percent jump by the Philadelphia Semiconductor Index.

Banking, chemical, steel and retail stocks also showed strong moves to the upside amid broad based buying interest.

On the U.S. economic front, the Commerce Department released a report unexpectedly showing a significant rebound in new home sales in the month of May.

The report showed new home sales surged 10.7 percent to an annual rate of 696,000 in May after plunging 12.0 percent to an upwardly revised rate of 629,000 in April.

The spike surprised economists had expected new home sales to dip 0.5 percent to an annual rate of 588,000 from the 591,000 originally reported for the previous month.

Meanwhile, a separate report from the University of Michigan showed consumer sentiment in the U.S. tumbled by slightly more than initially estimated in the month of June.

The report showed the consumer sentiment index for June was downwardly revised to 50.0 from the preliminary reading of 50.2.

The consumer sentiment index is down sharply from the final May reading of 58.4, plunging to its lowest level on record.

Commodity, Currency Markets

Crude oil futures are rising $0.18 to $107.80 a barrel after surging $3.35 to $107.62 a barrel last Friday. Meanwhile, after inching up $0.50 to $1830.30 an ounce in the previous session, gold futures are edging up $1.20 to $1,831.50 an ounce.

On the currency front, the U.S. dollar is trading at 135.46 yen versus the 135.23 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0556 compared to last Friday’s $1.0553.

Asia

Asian stocks posted strong gains on Monday as fears of prolonged inflation eased and data showed profits at China’s industrial firms shrank at a slower pace in May.

Treasury yields remained subdued and the dollar eased back slightly from a 20-year high reached earlier this month despite U.S. Federal Reserve officials keeping up their hawkish rhetoric.

As risk appetite improves, investors awaited the U.S. quarterly GDP growth rate numbers due this week to assess the outlook for U.S. rate hikes and the potential for a recession. Oil prices were volatile in Asian trading ahead of the G7 summit and the OPEC+ meeting.

China’s Shanghai Composite Index rose 0.9 percent to 3,379.19 after data showed profits across China’s industrial firms above designated size improved in May from the previous month.

Adding to the positive sentiment, a central bank advisor said China could consider trying to boost the economy by introducing special national bonds that don’t count as financial deficits.

Hong Kong’s Hang Seng Index jumped 2.4 percent to 22,229.52, led by gains in Chinese technology shares.

Japanese shares climbed for a third straight session, led by heavyweight technology stocks. The Nikkei 225 Index rallied 1.4 percent to 26,871.27, while the broader Topix closed 1.1 percent higher at 1,887.42.

Technology investor SoftBank Group jumped 3.7 percent, while Tokyo Electron, Advantest and Shin-Etsu Chemical rose 2-5 percent. Shipping stocks also posted broad-based gains, with Kawasaki Kisen Kaisha surging 9.6 percent.

Seoul stocks closed higher for a second day running amid speculation that inflation may have peaked and the pace of the Federal Reserve’s rate hikes could be slower than previously expected.

The Kospi gained 1.5 percent to finish at 2,401.92, with machinery and automotive stocks leading the surge.

Australian markets soared as firm commodity prices helped lift mining and energy stocks. The benchmark S&P/ASX 200 Index spiked 1.9 percent to 6,706 – rising for a third straight day and marking its biggest single-day gain since Jan. 28. The broader All Ordinaries Index ended 1.9 percent higher at 6,893.60.

Gold stocks underperformed, with Evolution Mining plunging nearly 22 percent after the company cut its full-year gold output guidance.

Europe

European stocks have moved mostly higher on Monday as investors reassess the expected path of Federal Reserve interest rate hikes in the light of falling inflation expectations.

While the French CAC 40 Index has fallen by 0.3 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both up by 0.6 percent.

Commodity-related stocks are gaining ground as restrictions in Shanghai and Beijing continue to ease.

Luxury retailers LVMH and Richemont have also moved to the upside as early indicators for China’s economic activity tracked by Bloomberg suggested an improvement in activity during June.

Prosus NV shares have soared. The Dutch-based technology investor is planning to sell more of its $134 billion stake in Chinese software giant Tencent, owner of WeChat, to finance a buyback program.

Intesa Sanpaolo has also rallied. The Italian bank has received supervisory clearance from the European Central Bank (ECB) to buy back its own shares for up to 3.4 billion euros ($3.6 billion).

Sandvik AB, a Swedish engineering company, has also surged after it signed an agreement to acquire Portugal-based Frezigest, SGPS, or Frezite.

Meanwhile, French pharmaceutical company Ipsen SA has slumped after it announced an agreement to acquire Epizyme, Inc. (EPZM), a company focused on delivering novel epigenetic therapies.

U.S. Economic Reports

New orders for U.S. manufactured durable goods increased by more than expected in the month of May, according to a report released by the Commerce Department on Monday.

The report showed durable goods orders climbed by 0.7 percent in May after rising by 0.4 percent in April. Economists had expected orders to inch up by 0.1 percent.

Excluding an advance in orders for transportation equipment, durable goods orders still rose by 0.7 percent in May after edging up by 0.2 percent in April. Ex-transportation orders were expected to rise by 0.3 percent.

At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of May. Pending home sales are expected to plunge by 4.0 percent in May after plummeting by 3.9 percent in April.

The Treasury Department is due to announce the results of this month’s auction of $46 billion worth of two-year notes at 11:30 am ET.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $47 billion worth of five-year notes.