Bargain Hunting May Contribute To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Monday, with stocks likely to regain ground following last week’s sell-off.

Traders may look to pick up stocks at relatively reduced levels following recent weakness, as the major averages ended last Friday’s trading at their lowest closing levels in over a month.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of some key economic data later in the week.

On Friday, the Commerce Department is due to release its report on personal income and spending, which includes a reading on inflation said to be preferred by the Fed.

With Fed Chair Jerome Powell saying the central bank will require “substantially more evidence” inflation is on a sustained downward trend before halting its rate hikes, traders are likely to keep a close eye on the inflation reading.

Reports on housing starts, consumer confidence, new and existing home sales and durable goods orders are also likely to attract attention in the coming days.

Stocks showed a significant move to the downside during trading on Friday, extending the sharp pullback seen over the two preceding sessions. With the continued weakness, the major averages fell to their lowest closing levels in over a month.

The major averages regained some ground going into the close but remained firmly negative. The Dow slid 281.76 points or 0.9 percent to 32,920.46, the Nasdaq slumped 105.11 points or 1.0 percent to 10,705.41 and the S&P 500 tumbled 43.39 points or 1.1 percent to 3,852.36.

For the week, the tech-heavy Nasdaq plummeted by 2.7 percent, while the S&P 500 and the Dow plunged by 2.1 percent and 1.7 percent, respectively.

The extended sell-off on Wall Street came amid ongoing concerns about the outlook for interest rates and the economy.

The Fed’s hawkish tone in Wednesday’s monetary policy announcement has added to worries about the central bank’s aggressive rate hikes tipping the economy into a recession.

While inflation has recently shown signs of slowing, the Fed signaled it plans to continue raising interest rates next year.

A recent batch of disappointing economic data has led to fears the Fed’s fight against inflation is already taking its toll on the economy.

Interest rate-sensitive commercial real estate stocks turned in some of the worst performances on the day, dragging the Dow Jones U.S. Real Estate Index down by 2.6 percent to its lowest closing level in over a month.

Significant weakness was also visible among natural gas stocks, as reflected by the 2.1 slump by the NYSE Arca Natural Gas Index.

The sell-off by natural gas stocks came amid a steep drop by the price of the commodity, with natural gas for January delivery plunging $0.37 or 5.3 percent to $6.60 per million BTUs.

Airline, utilities and oil service stocks also saw considerable weakness on the day, moving lower along with most of the other major sectors

Commodity, Currency Markets

Crude oil futures are rising $0.56 to $74.85 a barrel after tumbling $1.82 to 474.29 a barrel last Friday. Meanwhile, after climbing $12.40 to $1,800.20 an ounce in the previous session, gold futures are inching up $2.20 to $1,802.40 an ounce.

On the currency front, the U.S. dollar is trading at 136.58 yen versus the 136.60 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0598 compared to last Friday’s $1.0586.

Asia

Asian stocks fell broadly on Monday amid lingering worries over a possible recession and uncertainty over China’s economic reopening as the country battles a wave of Covid infections.

China’s top leaders pledged to stimulate domestic consumption and the real estate market, helping limit regional losses to some extent.

China’s Shanghai Composite Index tumbled 1.9 percent to 3,107.12, as a surge in new virus cases hit urban centers from north to south. Hong Kong’s Hang Seng Index dropped half a percent to 19,352.81.

A survey showed Chinese business confidence fell to its lowest level in nearly a decade, highlighting deepening cracks in the country’s economy.

Japanese shares suffered heavy losses as the yen strengthened on speculation that the Bank of Japan could tighten its ultra-loose monetary policy amid rising inflationary pressures.

The Nikkei average fell 1.1 percent to 27,237.64 ahead of the BoJ monetary policy statement due Tuesday. No change in monetary policy is expected, but traders will parse the statement carefully for any changes in the language. The broader Topix closed 0.8 percent lower at 1,935.41.

Seoul stocks extended losses for a third day running amid worries that further policy tightening by the Fed could result in a global recession next year. The Kospi average dropped 0.3 percent to 2,352.17.

Australian markets fell for a third straight session as financials and utilities dragged, offsetting gains in the mining sector. The benchmark S&P/ASX 200 Index slipped 0.2 percent to 7,133.90, while the broader All Ordinaries Index closed 0.2 percent lower at 7,321.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 index fell 0.7 percent to 11,518.14 following hawkish signals from the Federal Reserve and the European Central Bank.

The services sector in New Zealand expanded at a slower pace in November, the latest survey from BusinessNZ revealed earlier today.

A separate survey showed consumer confidence in the country fell sharply in the fourth quarter to the lowest level since the figures were first compiled in 1988.

Europe

European stocks have moved mostly higher on Monday after last week’s brutal sell-off following hawkish signals from the Federal Reserve and the European Central Bank.

Sentiment was underpinned after Chinese policymakers pledged to fine-tune Covid controls and boost the country’s ailing property market.

Investors have also reacted positively to the latest survey results showing that a measure of German business sentiment increased for a third straight month in December.

The Ifo business-climate index rose to 88.6 from a revised 86.4 in November. This was above economists’ forecast of 87.4.

While the French CAC 40 Index has risen by 0.6 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both up by 0.5 percent.

Freenet AG has shown a significant move to the upside after Deutsche Bank raised its rating on the German telecommunications and web content provider’s stock.

BP Plc, Shell and TotalEnergies have also surged, as oil prices jump on optimism over a demand recovery due to China’s easing of Covid curbs.

James Fisher & Sons has. The provider of marine engineering services has announced the sale of three businesses, in two separate transactions.

On the other hand, shares of AstraZeneca have edged down slightly after the drug maker announced mixed results from a lung cancer trial.

U.S. Economic Reports

The National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of December at 10 am ET. The housing market index is expected to rise to 36 in December from 33 in November.