Futures Pointing To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Tuesday, with stocks likely to see further upside after ending the previous session mostly higher.

Optimism about the outlook for interest rates may contribute to continued strength on Wall Street, as stocks appear poised to extend the upward trend seen over the past several sessions.

Potentially adding to the positive sentiment, San Francisco Federal Reserve President Mary Daly has said interest rate cuts are likely to be appropriate next year because of an improvement in inflation.

The Federal Reserve must make sure “we don’t give people price stability but take away jobs,” Daly told the Wall Street Journal in an interview.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of several key economic reports in the coming days.

The Commerce Department’s report on personal income and spending is likely to be in focus, as it includes readings on inflation said to be preferred by the Fed.

The Commerce Department released a report this morning unexpected showing a substantial increase in new residential construction in the U.S. in the month of November.

Stocks moved mostly higher over the course of the trading session on Monday, adding to the strong gains last week. The Nasdaq and the S&P 500 climbed firmly into positive territory, although the narrower Dow ended the day little changed.

While the Dow inched up 0.86 points or less than a tenth of a percent to 37,306.02, the Nasdaq rose 21.37 points or 0.5 percent to 4,740.56 and the S&P 500 climbed 90.89 points or 0.6 percent to 14,904.81.

Stocks continued to benefit from recent upward momentum, which has propelled the Dow to new record highs. The Nasdaq and the S&P 500 have also reached their best levels in nearly two years.

The major averages have moved higher for seven consecutive weeks due in part to optimism about the outlook for interest rates, with last week’s rally coming as the Federal Reserve’s latest projections hinted at three rate cuts next year.

However, several Fed officials have subsequently pushed back on investor hopes that rate cuts by the central bank are imminent.

Chicago Fed President Austan Goolsbee told CNBC’s “Squawk Box” he was confused by the reaction to the Fed announcement, which saw both stocks and bonds move sharply higher.

“It’s not what you say, or what the chair says. It’s what did they hear, and what did they want to hear,” Goolsbee said. “I was confused a bit — was the market just imputing, here’s what we want them to be saying?”

Nonetheless, CME Group’s FedWatch Tool still suggests there is a good chance the Fed will lower interest rates by a quarter point in March.

Later this week, the Commerce Department is due to release its report on personal income and spending in the month of November, which includes readings on inflation said to be preferred by the Fed.

The National Association of Home Builders released a report Monday morning showing homebuilder sentiment in the U.S. rebounded in December after falling for four consecutive months.

The report said the NAHB/Wells Fargo Housing Market Index climbed to 37 in December after falling to an eleven-month low of 34 in November. Economists had expected the index to rise to 36.

Steel stocks saw substantial strength on the day, resulting in a 3.2 percent spike the NYSE Arca Steel Index.

U.S. Steel (X) led the sector higher, skyrocketing by 26.1 percent after announcing an agreement to be acquired by Japan’s Nippon Steel for $55.00 per share in cash.

Significant strength also emerged among retail stocks, as reflected by the 1.6 percent gain posted by the Dow Jones U.S. Retail Index. The index reached its best closing level in well over a year.

Oil producer and pharmaceutical stocks also saw strength on the day, while housing and banking stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are slipping $0.07 to $72.40 a barrel after jumping $1.04 to $72.47 a barrel on Monday. Meanwhile, after edging up $4.80 to $2,040.50 an ounce in the previous session, gold futures are inching up $3 to $2,043.50 an ounce.

On the currency front, the U.S. dollar is trading at 144.39 yen compared to the 142.78 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0955 compared to yesterday’s $1.0924.

Asia

Asian stocks ended mixed on Tuesday after several Fed officials said it is too soon to talk about interest rate cuts.

Amid uncertainty about the Federal Reserve’s rate path, investors looked ahead to the release of a slew of U.S. economic data this week for further direction.

Copper traded flat, while gold ticked lower as the dollar received support from hawkish comments from New York Fed President John Williams and the Chicago Fed President Austan Goolsbee.

Oil held near two-week highs amid concerns of supply disruptions following an escalation in attacks on commercial ships in the Red Sea by Yemen’s Houthi militia.

Chinese shares ended little changed, with the benchmark Shanghai Composite Index finishing marginally higher at 2,932.39 after a choppy session.

Hong Kong’s Hang Seng Index dropped 0.8 percent to 16,505 after a magnitude-6.2 earthquake struck a remote and mountainous county on the northern edge of the Chinese Qinghai-Tibetan plateau just before midnight on Monday.

Japanese shares posted strong gains, while the yen reversed gains after the Bank of Japan left its guidance and ultra-easy policy unchanged, as widely expected. The central bank also kept its stance on its yield curve control policy unchanged.

The Nikkei 225 Index rallied 1.4 percent to 33,219.39, while the broader Topix Index closed 0.7 percent higher at 2,333.81.

Technology stocks topped the gainers list, with Tokyo Electron and Advantest climbing 3.7 percent and 4.1 percent, respectively.

Nippon Steel Corp. lost 2.8 percent after an announcement that it would buy U.S. Steel Corp for $14.1 billion to create the world’s second-largest steel company.

Seoul stocks ended marginally higher to extend gains for a fourth day running on U.S. rate cut hopes.

Australian markets rose notably as the RBA’s latest meeting minutes struck a balanced tone. The benchmark S&P ASX 200 Index jumped 0.8 percent to 7,489.10, led by energy stocks. The broader All Ordinaries Index settled 0.9 percent higher at 7,715.90.

Azure Minerals advanced 1.7 percent after the lithium developer received a sweetened takeover offer from Chile’s SQM and Hancock Prospecting.

Europe

European stocks are seeing modest gains on Tuesday, as final data from the statistical office Eurostat showed Eurozone inflation eased to the lowest in more than two years in November.

The harmonized index of consumer prices posted an annual growth of 2.4 percent in November after a 2.9 percent gain in October. The rate was the lowest since July 2021 and matched the initial estimate released on November 30..

Sentiment was underpinned somewhat after San Francisco Fed President Mary Daly said cuts to the U.S. central bank’s benchmark rate are likely to be appropriate next year because of an improvement in inflation.

The Fed must make sure “we don’t give people price stability but take away jobs,” Daly told the Wall Street Journal in an interview.

While the German DAX Index has risen by 0.5 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both up by 0.1 percent.

Earlier in the day, France’s central bank slightly lowered France’s GDP growth forecast to 0.8 percent for 2023, adding it expects a subsequent gradual acceleration up to 2026.

Medivir AB has jumped. The Swedish pharmaceutical company focused on cancer treatments, announced that its ongoing phase 1b/2a study with Fostrox + Lenvima demonstrated further improvement in durable clinical benefit in advanced hepatocellular carcinoma.

UBS has also moved notably higher after activist investor Cevian Capital paid 1.2 billion euros ($1.31 billion) for a stake in the Swiss bank.

Netcall has also surged. The software firm said that its trading for the first half of fiscal 2024 has been in line with management expectations.

Bayer AG has also risen. After a U.S. jury ordered Monsanto to pay $857 million to former students and parent volunteers of a U.S. school for toxic leaks, the German chemicals giant said it plans to have the verdict reduced or overturned.

Covestro has also rallied after reports that the Abu Dhabi National Oil Co. was preparing to increase its takeover offer for the chemicals maker.

Meanwhile, Superdry shares have plunged in London. The fashion retailer has warned of a hit to annual profit, citing challenging trading environment.

Specialist finance provider Time Finance has also declined despite reporting increased revenues and profitability in its half-year results.

Banknote printer De La Rue has also plummeted after reporting a wider loss-before tax for the first half, amidst a decrease in revenue.

U.S. Economic Reports

The Commerce Department released a report on Tuesday unexpected showing a substantial increase in new residential construction in the U.S. in the month of November.

The report said housing starts soared by 14.8 percent to an annual rate of 1.560 million in November after inching up by 0.2 percent to a downwardly revised rate of 1.359 million in October.

The surge surprised economists, who had expected housing starts to decrease by 0.9 percent to an annual rate of 1.360 million from the 1.372 million originally reported for the previous month.

Meanwhile, the Commerce Department said building permits slumped by 2.5 percent to an annual rate of 1.460 million in November after jumping by 1.8 percent to an upwardly revised rate of 1.498 million in October.

Building permits, an indicator of future housing demand, were expected to fall by 1.1 percent to an annual rate of 1.470 million from the 1.487 million originally reported for the previous month.

At 12:30 pm ET, Atlanta Federal Reserve President Raphael Bostic is due to speak on the U.S. economy, the outlook for business and the Federal Reserve’s role before a Harvard Business School Club of Atlanta alumni luncheon.

Chicago Federal Reserve President Austan Goolsbee is scheduled to participate in a live interview on Fox News’s “Special Report with Brett Baier” at 6 pm ET.

Stocks In Focus

Shares of Arvinas (ARVN) are moving sharply higher in pre-market trading after Wells Fargo upgraded its rating on the pharmaceutical company’s stock to Overweight from Equal Weight.

Solar companies Sunnova (NOVA) and Sunrun (RUN) are also likely to see initial strength after Piper Sandler upgraded its ratings on both companies’ stocks to Overweight from Neutral.

On the other hand, shares of Plug Power (PLUG) may come under pressure after Piper Sandler downgraded its rating on the green energy company’s stock to Underweight from Neutral.

Information technology company Accenture (ACN) may also move to the downside after reporting better than expected fiscal first quarter results but providing disappointing fiscal second quarter revenue guidance.