Futures Pointing To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to give back ground after ending last Friday’s trading sharply higher.

Stocks showed wild swings over the course of the trading session on Friday before ending the day sharply higher. With the strong upward move, the major averages regained some ground after moving notably lower over the past few sessions.

The major averages saw further upside in the final hour of trading, reaching new highs for the session. The Dow jumped 321.83 points or 1.1 percent to 31,097.26, the Nasdaq advanced 99.11 points or 0.9 percent to 11,127.85 and the S&P 500 shot up 39.95 points or 1.1 percent to 3,825.33.

Despite the strong gains on the day, the major averages posted notable losses for the week. The tech-heavy Nasdaq plunged by 4.1 percent, the S&P 500 tumbled by 2.2 percent and the Dow slumped by 1.3 percent.

The higher close on Wall Street came as traders went bargain hunting following the significant decrease seen early in the session.

Concerns about the possibility of tighter monetary policy triggering a global recession continue to weigh on the markets in early trading.

Central banks from around the world have signaled their intent to continue to raising interest rates in an effort to fight inflation while acknowledging they can’t guarantee a “soft landing” for the economy.

Stocks came under pressure following the release of a report from the Institute for Supply Management showing the pace of growth in U.S. manufacturing activity slowed by more than expected in the month of June.

The ISM said its manufacturing PMI slid to 53.0 in June from 56.1 in May, although a reading above 50 still indicates growth in the sector. Economists had expected the index to dip to 54.9.

With the bigger than expected decrease, the manufacturing PMI slumped to its lowest level since hitting 52.4 in June of 2020.

A separate report from the Commerce Department showed U.S. construction spending unexpectedly edged lower in the month of May.

“Wall Street isn’t liking seeing so many key economic indicators have a trajectory that looks like they will retest some of the pandemic lows,” said Edward Moya, Senior Market Analyst at OANDA.

He added, “A choppy period seems likely until investors feel confident that the economy is still in decent shape and that the Fed won’t miss the opportunity to decelerate their tightening pace in September.”

Housing stocks moved sharply higher over the course of the trading session, driving the Philadelphia Housing Sector Index up by 3.9 percent.

Substantial strength also emerged among gold stocks, as reflected by the 2.9 percent spike by the NYSE Arca Gold Bugs Index. The index rebounded after hitting its lowest intraday level in over two years. The rally by gold stocks came despite a continued decrease by the price of the precious metal..

Biotechnology stocks also showed a strong move to the upside on the day, resulting in a 2.5 percent jump by the NYSE Arca Biotechnology Index.

Utilities, airline, retail and commercial real estate stocks also moved notably higher over the course of the session, while significant weakness remained visible among semiconductor and computer hardware stocks.

Commodity, Currency Markets

Crude oil futures are rising $0.38 to $108.81 a barrel after jumping $2.67 to $108.43 a barrel last Friday. Meanwhile, after slipping $5.80 to $1,801.50 an ounce in the previous session, gold futures are inching up $2.10 to $1,803.60 an ounce.

On the currency front, the U.S. dollar is trading at 135.74 yen compared to the 135.62 yen it fetched on Monday. Against the euro, the dollar is valued at $1.0294 compared to yesterday’s $1.0422.

Asia

Asian stocks advanced on Tuesday after reports emerged that the United States may decide to cut some tariffs on Chinese imports in an effort to tame record-high inflation.

China’s Vice Premier Liu He and U.S. Treasury Secretary Janet Yellen held a virtual call Tuesday about macroeconomic issues, according to official statements from both sides.

Meanwhile, China’s services activity jumped to the highest level in nearly a year in June and Japan’s services activity expanded at the fastest pace since October 2013, briefly easing concerns about slowing global growth.

Chinese shares fluctuated before ending on a flat note, as concerns over a flare-up in COVID-19 cases offset signs of easing Sino-U.S. tensions and upbeat business activity data for June.

The benchmark Shanghai Composite finished marginally lower at 3,404.03 while Hong Kong’s Hang Seng index edged up 0.1 percent to 21,853.07.

Japanese shares rose sharply as investors brought down beaten-down technology and growth stocks, tracking declines in U.S. yields. The Nikkei average climbed 1.03 percent to 26,423.47 while the broader Topix index closed half a percent higher at 1,879.12.

Technology investor SoftBank Group rallied 1.8 percent and Uniqlo owner Fast Retailing surged 4.3 percent. Shipping firms traded weak, with Mitsui O.S.K. Lines and Kawasaki Kisen Kaisha losing 3-4 percent.

Seoul stocks rallied despite inflation in the country rising to a 24-year high in June, fanning expectations of a big rate hike this month. The Kospi average soared 1.80 percent to 2,341.78, snapping a four-day losing streak ahead of the earnings season.

Internet portal operator Naver gained 3.4 percent and platform giant Kakao added 5.7 percent. Vaccine maker SK Bioscience spiked nearly 25 percent after the country reported over 18,000 new COVID-19 cases in the past 24 hours.

Australian markets eked out modest gains as the Reserve Bank raised its cash rate by 50 basis points to 1.35 percent, its third successive increase to combat inflation, and flagged more tightening ahead.

The benchmark S&P/ASX 200 rose 0.25 percent to 6,629.30 while the broader All Ordinaries index inched up 0.31 percent to 6,818.10. Energy stocks topped the gainers list followed by information technology stocks.

Europe

European stocks fell on Tuesday after a survey showed business growth across the euro zone slowed further last month, partly due to inflationary pressures.

Signs of a flare-up in COVID-19 cases in China also added to global growth worries and offset signs of an easing in U.S.-Sino tensions.

The pan European Stoxx 600 dropped 0.8 percent to 406.26 after rising half a percent on Monday.

The German DAX fell 1.1 percent, France’s CAC 40 index declined 1.2 percent and the U.K.’s FTSE 100 was down 1.3 percent.

Scandinavian airline SAS slumped 14 percent after it applied for bankruptcy in the United States to help accelerate restructuring plans.

French wine and spirits company Remy Cointreau jumped more than 4 percent after Jefferies upgraded the stock to “buy” from “hold”.

German online food-delivery service Delivery Hero SE gained 1 percent. The company said it has successfully taken all closing actions for the transaction in relation to GlovoApp23 S.A.

Deutsche Post DHL fell about 1 percent. The package delivery and supply chain management company said that its division, DHL eCommerce Solutions, is investing 560 million euros across its UK ecommerce operation- DHL Parcel UK.

British supermarket chain J Sainsbury rallied 1.2 percent after confirming its full-year outlook.

B&M European Value Retail S.A. declined 1.5 percent. The convenience retailer has appointed Mike Schmidt as its next chief financial officer.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of May at 10 am ET. Factory orders are expected to increase by 0.5 percent.