U.S. Stocks May Give Back Ground In Early Trading

The major U.S. index futures are currently pointing to a lower open on Monday, with stocks likely to give back ground following the rally seen last week.

Profit taking may contribute to initial weakness on Wall Street, as traders cash in on the recent strength in the markets.

Trading activity may be somewhat subdued, however, as traders look ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

With the Fed widely expected to raise interest rates by another 75 basis points, traders are likely to pay close attention to the accompanying statement.

Traders have recently expressed optimism the Fed will slow the pace of rate hikes at coming meetings and will look to the statement for proof their hopes are well founded.

Following the mixed performance seen in Thursday’s session, stocks moved sharply higher over the course of the trading day on Friday. The major averages all showed strong moves to the upside, with the Dow reaching a two-month closing high.

The major averages reached new highs going into the close of trading. The Dow surged 828.52 points or 2.6 percent to 32,861.80, the Nasdaq shot up 309.78 points or 2.9 percent to 11,102.45 and the S&P 500 jumped 93.76 points or 2.5 percent to 3,901.06.

For the week, the Dow skyrocketed by 5.7 percent, the S&P 500 spiked by 4.0 percent and the Nasdaq rallied by 2.2 percent.

The rally on Wall Street came despite a steep drop by shares of Amazon (AMZN), with the online retail giant plunging by 9.7 percent.

Amazon has came under pressure after reporting mixed third quarter results and providing disappointing fourth quarter revenue guidance.

Traders reacted more positively to other earnings news, with semiconductor giant Intel (INTC) soaring despite lowering its full-year guidance. Intel reported third quarter results that beat analyst estimates.

Shares of Apple (AAPL) also moved sharply higher after the tech giant reported better than expected fiscal fourth quarter earnings but forecast slower revenue growth in the current quarter.

Energy giant Exxon Mobil (XOM) also moved to the upside after reporting record profits in the third quarter due to higher energy prices.

Buying interest may also have been generated in reaction to a Commerce Department report showing core consumer price growth accelerated by slightly less than expected in September.

The Commerce Department said the annual rate of core consumer price growth accelerated to 5.1 percent in September from 4.9 percent in August.

Economists had expected the annual rate of growth in core consumer prices, which exclude food and energy prices, to accelerate to 5.2 percent.

With Intel helping to lead the way higher, semiconductor stocks showed a substantial move to the upside, driving the Philadelphia Semiconductor Index up by 4.0 percent.

Telecom stocks also turned in a particularly strong performance on the day, with the NYSE Arca North American Telecom Index surging by 3.7 percent to its best closing level in a month.

Wireless network operator T-Mobile (TMUS) posted a standout gain after reporting strong third quarter subscriber growth and raising its full-year guidance.

Considerable strength was also visible among networking stocks, as reflected by the 2.9 percent jump by the NYSE Arca Networking Index.

Biotechnology, utilities and housing stocks also saw significant strength, while steel and oil service stocks showed notable moves to the downside.

Commodity, Currency Markets

Crude oil futures are tumbling $1.32 to $86.58 a barrel after slumping $1.18 to $87.90 a barrel last Friday. Meanwhile, after tumbling $20.80 to $1,644.80 an ounce in the previous session, gold futures are inching up $0.10 to $1,644.90 an ounce.

On the currency front, the U.S. dollar is trading at 148.67 yen versus the 147.60 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $0.9927 compared to last Friday’s $0.9965.

Asia

Asian stocks rose broadly on Monday amid renewed bets the U.S. Federal Reserve may slow the pace of interest-rate increases at its December meeting.

With U.S. inflation largely untamed at around a 40-year high, investors looked ahead to the Federal Reserve meeting on Tuesday and Wednesday and U.S. jobs data due on Friday for additional clues on the economic and rate outlook.

Chinese and Hong Kong shares underperformed regional peers as weak economic data added to concerns about slowing growth.

China’s official manufacturing purchasing managers’ index (PMI) fell to 49.2 in October from 50.1 in September, and the non-manufacturing PMI, which measures business sentiment in the services and construction sectors, dropped to 48.7 from 50.6 in September as virus disruptions worsened and export orders remained under pressure, separate reports showed.

COVID-19 infections continued to rise across China’s southern manufacturing hub of Guangzhou, prompting lockdowns in more residential areas.

Mamau’s government reinstated some tough COVID curbs and workers appear to have fled the iPhone factory in Zhengzhou amid COVID curbs, raising concerns over China and its strict zero-COVID policy.

China’s Shanghai Composite index fell 0.77 percent to 2,893.48 while Hong Kong’s Hang Seng index tumbled 1.18 percent to 14,687.02.

Japanese shares rallied as investors reacted to mixed economic readings. Industrial production dropped for the first time in four months in September, but retail sales grew more than expected, showing some resilience in the Japanese economy.

The Nikkei average rallied 1.78 percent to 27,587.46, marking a six-week high. The broader Topix index closed 1.60 percent higher at 1,929.43.

Tech stocks such as Advantest and Tokyo Electron rose 1-2 percent. Hitachi soared 6 percent after the conglomerate raised its profit forecast.

Seoul stocks climbed even as weak industrial output, retail sales and facility investment figures suggested the country’s economic recovery may be losing steam. The Kospi average gained 1.11 percent to finish at 2,293.61, led by gains in the tech sector.

Australian shares rose to post their best monthly gain sine March as data showed retail spending stayed surprisingly resilient in September despite surging inflation and higher interest rates.

The benchmark S&P ASX 200 rose 1.15 percent to 6,863.50 and posted a 6 percent gain for October, as investors braced for a modest interest rate hike by Reserve Bank on Tuesday. The broader All Ordinaries index ended 1.17 percent higher at 7,054.80.

Origin Energy shares jumped nearly 3 percent after the company reported strong performance in its Integrated Gas and Energy Markets divisions.

Europe

European stocks slipped into the red on Monday as investors digested weak China data and eyed Eurozone inflation as well as GDP figures for direction.

Central bank meetings also remained on investors’ radar, with both the Federal Reserve and Bank of England expected to raise rates by 75 basis points on Wednesday and Thursday, respectively.

The pan European STOXX 600 was down 0.2 percent at 409.98 after closing 0.1 percent higher on Friday.

The German DAX and the U.K.’s FTSE 100 both traded marginally lower, while France’s CAC 40 index dropped 0.4 percent.

Credit Suisse rose over 2 percent after the Swiss bank unveiled details of a plan to raise 4 billion Swiss francs in capital.

Italian lender UniCredit SpA added 1.7 percent after raising its full-year guidance on net interest income.

International Distribution Services — formerly Royal Mail — jumped 6.2 percent in London after its largest labor union, the Communications Workers Union (CWU), has withdrawn its planned strike action in Britain in the next two weeks.

Engineering company IMI fell over 1 percent after it agreed to acquire New York-based micro-fluid flow control business CorSolutions.

Heat treatment specialist Bodycote tumbled 2.8 percent after naming Ben Fidler as its next chief financial officer, succeeding Dominique Yates who announced his intention to retire earlier this year.

Fresenius Medical Care shares surged 5.4 percent despite the German healthcare company cutting its FY22 profit outlook.

The company said it expects 2022 net income attributable to shareholders of the company to decline in the high teens to mid-twenties percentage range.

U.S. Economic Reports

MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of October at 9:45 am ET. The Chicago business barometer is expected to inch up to 47.1 in October from 45.7 in September, although a reading below 50 would still indicate a contraction.