China News, Higher Bank Dividends May Lead To Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to move back to the upside following the pullback seen in the previous session.

Early buying interest may be generated in reaction to news that China has cut quarantine times for international travelers in a big step toward easing Covid-19 controls.

The news has contributed to pre-market strength among travel and casino stocks, with Wynn Resorts (WYNN) and Las Vegas Sands (LVS) showing significant moves to the upside.

Banking stocks are also likely to see early strength after several financial giants, including Morgan Stanley (MS), Goldman Sachs (GS), Bank of America (BAC) and Wells Fargo (WFC), raised their dividends after passing the Federal Reserve’s annual stress tests.

Traders may also continue to pick up stocks at relatively reduced levels following recent weakness, although lingering concerns about a potential recession may keep buying interest somewhat subdued.

U.S. stocks closed lower on Monday after spending much of the day’s session in negative territory as investors largely stayed cautious, reassessing the expected path of Federal Reserve interest rate hikes amid falling inflation expectations.

The major averages all ended in the red, with the Nasdaq posting a more pronounced loss. The Dow ended down by 62.42 points or 0.2 percent at 31,438.26, coming off the day’s high of 31,598.59. The S&P 500 settled lower by 11.63 points or 0.3 percent at 3,900.11, while the Nasdaq closed lower by 83.07 points or 0.7 percent at 11,524.55.

Salesforce.com, Nike, Boeing, American Express, Walt Disney and 3M shed 1 to 2.5 percent. Shares of Spirit Airlines tumbled nearly 8 after the company announced that it would accept Frontier Group’s latest takeover bid.

United Health and Chevron both ended nearly 2 percent higher. Walgreens Boots Alliance, Merck and Caterpillar climbed 1.1 to 1.3 percent.

Shares of BioNTech surged 7.2 percent, lifted by an announcement from the company that its Omicron-based Covid-19 booster improves immune response to that variant.

In U.S. economic news, the Commerce Department released a report showing new orders for U.S. manufactured durable goods increased by more than expected in the month of May.

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.

A separate report from the National Association of Realtors showed an unexpected rebound in pending home sales in the month of May.

NAR said its pending home sales index climbed 0.7 percent to 99.9 in May after plunging by 4 percent to a revised 99.2 in April. The increase surprised economists, who had expected pending home sales to tumble by another 3.7 percent.

Commodity, Currency Markets

Crude oil futures are climbing $1.35 to $110.92 a barrel after jumping $1.95 to $109.57 a barrel on Monday. Meanwhile, after dipping $5.50 to $1,824.80 an ounce in the previous session, gold futures are inching up $0.90 to $1,825.70 an ounce.

On the currency front, the U.S. dollar is trading at 136.19 yen compared to the 135.46 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0550 compared to yesterday’s $1.0584.

Asia

Asian stocks fluctuated before closing mostly higher on Tuesday after China announced changes to testing and quarantine rules in the first step towards easing border controls.

China’s Shanghai Composite Index reversed an early slide to close 0.9 percent higher at 3,409.21 as health authorities cut the mandatory quarantine period for inbound visitors to 10 days from three weeks.

Hong Kong’s Hang Seng Index also reversed course to end 0.9 percent higher at 22,418.97. Sentiment was underpinned by an official’s remarks that China will roll out tools in its policy reserve in a timely way to cope with more economic challenges.

Japanese shares ended on a positive note after having spent most of the day in the red. The Nikkei 225 Index rose 0.7 percent to settle at 27,049.47, closing above the psychologically important 27,000 level for the first time in two weeks and extending its winning streak to a fourth straight session. The broader Topix shot up 1.1 percent to 1,907.38.

Energy stocks rallied after crude prices jumped nearly 1 percent in Asian trading. Inpex Corp. surged 4.9 percent and Japan Petroleum climbed 4.8 percent.

Tokyo Electric Power soared 7.2 percent as the government warned of tight power supply amid a heat wave in the Japanese capital.

Seoul stocks extended their winning streak to a third day, led by gains by automobile, airline and technology stocks. State-run utility Korea Electric Power Corp. led losses to close 3.7 percent lower. The Kospi gained 0.8 percent to close at 2,422.09.

Australian markets hit a two-week high as miners and energy stocks surged on optimism over Chinese demand. The benchmark S&P/ASX 200 Index advanced 0.9 percent to 6,763.60, while the broader All Ordinaries Index added 0.9 percent to end at 6,953.40.

Miners BHP, Rio Tinto and Fortescue Metals Group rose 2-3 percent on expectations that China’s decision to ease some COVID-19 restrictions and the country’s pledge to support its economy would boost iron ore demand.

Origin Energy, Santos and Woodside Energy jumped 2-3 percent in the energy sector. Seafood supplier Tassal Group spiked 16.1 percent after rejecting a sweetened $721 million takeover offer from Canada’s Cooke Inc.

Europe

European stocks have advanced on Tuesday as China cut quarantine times for international travelers in a big step toward easing Covid-19 controls and ECB President Christine Lagarde downplayed fears of a recession in the euro zone.

“We have markedly revised down our forecasts for growth in the next two years. But we are still expecting positive growth rates due to the domestic buffers against the loss of growth momentum,” Lagarde said at the Sintra Forum.

While the German DAX Index is up by 0.8 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both up by 1.2 percent.

German consumer confidence dropped to a new record low in July as consumers see the risk of the economy slipping to a recession, survey results from the market research group GfK showed.

The consumer confidence index fell to -27.4 in July from revised -26.2 in June. The score was forecast to fall to -27.6.

French consumer confidence weakened for the sixth straight month in June to reach its lowest level in nearly nine years, monthly survey results from the statistical office Insee revealed. The consumer confidence index dropped to 82 in June from 85 in May.

Volkswagen has moved to the upside. The German automaker is close to selling a minority stake in its U.S. electric-vehicle charge business to an arm of Siemens, the Wall Street Journal reported.

Luxury retailers Kering, LVMH and Richemont have also mvoed notably higher on optimism that Chinese demand will improve.

Valeo has also surged after the car parts company won a major contract from BMW.

Miners Anglo American, Antofagasta and Glencore have also rallied in London as iron ore futures gain on optimism over improved demand from China, the world’s second-biggest economy and top metals consumer.

Energy services firm Petrofac has also jumped. The company said it expects revenue for its Asset Solutions unit to be higher in the second half of the year, supported by strong order intake in the year to date.

Meanwhile, Akzo Nobel NV has fallen after the Dutch chemicals company named Gregoire Poux-Guillaume as its new chief executive.

U.S. Economic Reports

Standard & Poor’s is scheduled to release its report on home prices in major metropolitan areas in the month of April at 9 am ET.

At 10 am ET, the Conference Board is due to release its report on consumer confidence in the month of June. The consumer confidence index is expected to drop to 101.0 in June from 106.4 in May.

San Francisco Federal Reserve President Mary Daly is scheduled to participate in a virtual fireside chat at an event hosted by LinkedIn at 12:30 pm ET.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $40 billion worth of seven-year notes.

Stocks In Focus

Shares of Occidental Petroleum (OXY) are moving notably higher in pre-market trading following news Warren Buffett’s Berkshire Hathaway (BRK.b) has increased its stake in the oil and gas company to 16.4 percent.

Cloud computing company Snowflake (SNOW) is also likely to see initial strength after Jefferies upgraded its rating on the company’s stock to Buy from Hold.

On the other hand, shares of Nike (NKE) may move to the downside after the athletic apparel and footwear maker reported better than expected fiscal fourth quarter results but provided disappointing revenue guidance.