Traders May Continue To Pick Up Stocks At Relatively Reduced Levels

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to extend the rally seen during Friday’s trading.

Traders may continue to pick up stocks at relatively reduced levels after the rally seen in the previous session halted a recent downward trend.

Positive sentiment may also be generated in reaction to upbeat earnings news from Goldman Sachs (GS), with the financial giant jumping by 3.8 percent in pre-market trading.

The advance by Goldman Sachs comes after the company reported second quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Bank of America (BAC) may move to the downside after the financial giant reported weaker than expected second quarter earnings.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of earnings news from a slew of big-name companies later this week.

IBM Corp. (IBM), Johnson & Johnson (JNJ), Netflix (NFLX), Tesla (TSLA), American Express (AXP) and Twitter (TWTR) are among the companies due to report their quarterly results.

Traders may also be reluctant to make significant moves ahead of the Federal Reserve’s monetary policy decision next week, when the central bank is expected to raise interest rates by at least 75 basis points.

After trending lower for several sessions, stocks showed a substantial move back to the upside during trading on Friday. With the strong upward move on the day, the Dow snapped a five-session losing streak.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow spiked 658.09 points or 2.2 percent to 31,288.26, the Nasdaq jumped 201.24 points or 1.8 percent to 11,452.42 and the S&P 500 surged 72.78 points or 1.9 percent to 3,863.16.

Despite the significant rebound on the day, the major averages all moved lower for the week. The Nasdaq slumped by 1.6 percent, the S&P 500 slid by 0.9 percent and the Dow edged down by 0.2 percent.

A positive reaction to the latest earnings news contributed to the rally on Wall Street, as some traders look to pick up stocks at relatively reduced levels.

Shares of Citigroup (C) moved sharply higher after the financial giant reported second quarter earnings that exceeded analyst estimates.

Health insurer and Dow component UnitedHealth (UNH) also posted a strong gain after reporting better than expected second quarter results and raising its full-year guidance.

Shares of Wells Fargo (WFC) also showed a notable move to the upside even though the mortgage banking giant reported second quarter earnings that missed expectations.

Traders also reacted positively to a slew of U.S. economic data, including a report from the Commerce Department showing retail sales jumped by more than expected in the month of June.

The Commerce Department said retail sales shot up by 1.0 percent in June after edging down by a revised 0.1 percent in May.

Economists had expected retail sales to increase by 0.8 percent compared to the 0.3 percent dip originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales still surged by 1.0 percent following a 0.6 percent increase in May. Ex-auto sales were expected to climb by 0.6 percent.

A separate report from the University of Michigan unexpectedly showed a modest improvement in U.S. consumer sentiment in the month of July.

The report showed the consumer sentiment index inched up to 51.1 in July from a record low 50.0 in June. The uptick surprised economists, who had expected the index to edge down to 49.9.

Inflation expectations also eased slightly, with one-year inflation expectations dipping to 5.2 percent in July from 5.3 in June and five-year inflation expectations slipping to 2.8 percent from 3.1 percent.

The Labor Department also released a report showing U.S. import prices crept up by much less than expected in the month of June, with a continued surge in prices for fuel imports partly offset by a decrease in prices for non-fuel imports.

Meanwhile, traders largely shrugged off a report from the Federal Reserve showing an unexpected dip in U.S. industrial production in the month of June.

“U.S. stocks rallied as investors grow optimistic that signs are emerging that inflation is slowing, consumer spending remains healthy, and on a better second day of earnings,” said Edward Moya, Senior Market Analyst and OANDA.

He added, “There still remains a good chance that we will see stocks make fresh lows, but now appears to be the time for some traders to test the waters.”

Banking stocks turned in some of the market’s best performances following recent weakness, with the KBW Bank Index spiking by 5.8 percent after ending the previous session at its lowest closing level in well over a year.

Substantial strength also emerged among brokerage stocks, as reflected by the 3.4 percent surge by the NYSE Arca Broker/Dealer Index.

Networking stocks also showed a significant move to the upside, resulting in a 2.8 percent jump by the NYSE Arca Networking Index.

Semiconductor, healthcare, energy and retail stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are surging $2.19 to $99.78 a barrel after jumping $1.81 to $97.59 a barrel last Friday. Meanwhile, after edging down $2.20 to $1,703.60 an ounce in the previous session, gold futures are climbing $7.60 to $1,711.20 an ounce.

On the currency front, the U.S. dollar is trading at 138.35 yen versus the 138.57 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0128 compared to last Friday’s $1.0080.

Asia

Asian stocks advanced on Monday after U.S. stocks ended several days of sell-offs with a sharp rebound on Friday, helped by upbeat earnings news and strong economic data. Markets in Japan were closed for a holiday.

The Bank of Japan holds its policy meeting this week, with analysts expecting the central bank to stick with its ultra-easy policies amid concerns the yen’s decades-low weakness will add to the cost of imported commodities and widen the country’s trade deficit.

Chinese shares surged as the central bank governor pledged strong support for the economy and regulators urged lenders to extend loans to qualified real estate projects following a widening mortgage payment boycott on unfinished houses.

The benchmark Shanghai Composite Index jumped 1.6 percent to close at 3,278.10, with financials and property developers pacing the gainers. Hong Kong’s Hang Seng Index soared 2.7 percent to 20,846.18.

Seoul stocks rallied to hit a two-week high after a survey showed U.S. consumers’ inflation expectations eased in July on the back of a drop in oil prices. The Kospi surged 1.9 percent to settle at 2,375.25.

Tech and auto shares topped the gainers list, with Hyundai Motor, Kia Corp, SK Hynix and Samsung Electronics rising 1-3 percent. Financials Shinhan Financial Group and KB Financial Group spiked 4-5 percent.

Australian markets advanced, led by energy stocks. The benchmark S&P ASX 200 Index shot up 1.2 percent to 6,687.10, while the broader All Ordinaries Index closed 1.3 percent higher at 6,888.

Woodside Energy and Santos gained over 2 percent each as oil extended Friday’s gains on dollar weakness and signs of tight supplies.

Suncorp soared 6.1 percent after Australia and New Zealand Banking Group said it would buy the insurer’s banking business. Shares of the latter were in a trading halt.

Across the Tasman Sea, New Zealand shares eked out modest gains after the government said it would extend a reduction in fuel taxes to tackle higher inflation and temper the surge in gasoline prices.

The benchmark S&P NZX-50 Index closed 0.4 percent higher at 11,163.63 despite annual inflation quickening to a 32-year high of 7.3 percent in the April-June quarter.

Europe

European stocks have moved higher on Monday ahead of this week’s ECB meeting and the expected resumption of an important gas pipeline that is currently closed for maintenance. The euro held at one-week high after several Fed officials said they didn’t favor a 100 basis point rate hike.

At its July 21 meeting, the European Central bank is likely to hike its policy rates by 25 basis points and signal a 50 basis point increase for September.

Elsewhere, Italian Prime Minister Mario Draghi will address parliament on Wednesday after his resignation was rejected by the country’s president.

While the French CAC 40 Index is up by 1.1 percent, the U.K.’s FTSE 100 Index is up by 1.0 percent and the German DAX Index is up by 0.9 percent.

Euromoney Institutional Investor has jumped after it agreed to be bought by a private equity consortium led by France’s Astorg Asset Management for £1.6 billion.

Finland’s Nordea Bank has also shown a substantial move to the upside after its second-quarter profit beat estimates.

Food delivery company Deliveroo has also moved notably higher despite cutting its annual sales forecast.

Public relations and advertising giant WPP has also rsien after buying ecommerce agency Corebiz for an undisclosed amount.

Meanwhile, GSK has slumped after the drug maker spun of its consumer health business in the biggest listing in Europe for more than a decade.

U.S. Economic Reports

The National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of July at 10 am ET. The housing market index is expected to edge down to 66 in July from 67 in June.

Stocks In Focus

Shares of Synchrony Financial (SYF) are moving sharply higher in pre-market trading after the financial services company reported second quarter results that beat analyst estimates on both the top and bottom lines.

Fresh Del Monte Produce (FDP) is also likely to see initial strength after a report from Bloomberg said infrastructure investor I Squared Capital is exploring an expanded partnership with the fruit and vegetable company that could include a takeover.

Shares of Boeing (BA) may also move to the upside on news Delta is ordering 100 of the aerospace giant’s 737-10 jets with options for an additional 30 airplanes.

On the other hand, shares of Paramount Global (PARA) may come under pressure after Morgan Stanley downgraded its rating on the company’s stock to Underweight from Equal-Weight.