Profit Taking May Contribute To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a modestly lower open on Monday, with stocks likely to give back ground after turning in a strong performance last week.

Traders may look to cash in on recent strength in the markets, which lifted the Nasdaq and S&P 500 to new record closing highs last Friday.

Overall trading activity may be somewhat subdued, however, as a lack of major U.S. economic data may keep traders on the sidelines ahead of several key events later this week.

Federal Reserve Chair Jerome Powell’s congressional testimony is likely to be in focus, as investors on Wall Street analyze the central bank chief’s comments for clues about the outlook for interest rates.

Powell is due to testify before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday.

Later in the week, the spotlight will shift to the Labor Department’s report on the employment situation in the month of February.

The report, which is due to be released on Friday, is expected to show employment jumped by 200,000 jobs in February after surging by 353,000 jobs in January.

On Tuesday, the Institute for Supply Management is due to release its report on service sector activity in the month of February.

The ISM’s services PMI is expected to edge down to 53.0 in February from 53.4 in January, although a reading above 50 would still indicate growth.

Reports on factory orders, private sector employment, weekly jobless claims and the U.S. trade deficit are also due to be released this week along with the Fed’s Beige Book.

Stocks showed a strong move to the upside during trading on Friday, adding to the gains posted in Thursday’s session. With the extended upward move, the Nasdaq and S&P 500 once again reached new record closing highs.

The tech-heavy Nasdaq jumped 183.02 points or 1.1 percent to 16,274.94 and the S&P 500 climbed 40.81 points or 0.8 percent to 5,137.08. The narrower Dow posted a more modest gain, rising 90.99 points or 0.2 percent to 39,087.38.

For the week, the Nasdaq shot up by 1.7 percent and the S&P 500 advanced by 1.0 percent, but the Dow edged down by 0.1 percent.

The surge by the Nasdaq partly reflected substantial strength among computer hardware stocks following upbeat results from Dell (DELL), with the NYSE Arca Computer Hardware Index soaring by 6.9 percent to a record closing high.

Shares of Dell skyrocketed by 31.6 percent after the computer maker reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

The upbeat results from Dell also contributed to significant strength among semiconductor stocks, as reflected by the 4.3 percent spike by the Philadelphia Semiconductor Index. The index also reached a record closing high.

Biotechnology and networking stocks also saw considerable strength, while gold, oil service and pharmaceutical stocks turned in some of the best performances outside the tech sector.

The strength on Wall Street also came following the release of a report from the Institute for Supply Management showing manufacturing activity in the U.S. unexpectedly contracted at an accelerated rate in the month of February.

The ISM said its manufacturing PMI dipped to 47.8 in February from 49.1 in January, with a reading below 50 indicating contraction. Economists had expected the index to inch up to 49.5.

The University of Michigan also released revised data showing consumer sentiment in the U.S. unexpectedly deteriorated in the month of February.

The report said the consumer sentiment index for February was downwardly revised to 76.9 from the previously reported 79.6. Economists had expected the reading to be unrevised.

With the unexpected downward revision, the consumer sentiment index is now below the January reading of 79.0.

The data contributed to a downturn by treasury yields, which added to optimism about the Federal Reserve eventually cutting interest rates.

Commodity, Currency Markets

Crude oil futures are falling $0.42 to $79.55 a barrel after jumping $1.71 to $79.97 a barrel last Friday. Meanwhile, after surging $41 to $2,095.70 an ounce in the previous session, gold futures are edging down $5.30 to $2,090.40 an ounce.

On the currency front, the U.S. dollar is trading at 150.49 yen versus the 150.12 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0848 compared to last Friday’s $1.0837.

Asia

Asian stocks turned in a mixed performance on Monday, as investors awaited cues from Federal Reserve Chair Jerome Powell’s congressional testimony and the annual meeting of China’s top political advisory body.

The dollar moved in a tight range, while gold held near a two-month high in Asian trading on hopes for a Fed rate cut in June.

Oil held near the highest level this year following the widely expected extension of voluntary output cuts by the OPEC+ producer group on Sunday.

China’s Shanghai Composite Index rose 0.4 percent to 3,039.31 as the annual Congress convened, with investors expecting measures to revive a slowing economy and salvage the property market.

Accelerated clean-up of distressed developers and other policies will help smooth the path to a smaller, more sustainable role in China’s economy, the International Monetary Fund said in a report.

Hong Kong’s Hang Seng Index finished marginally higher at 16,595.97 after a choppy session.

Japanese shares advanced after reports emerged that the government would declare victory over inflation. The Nikkei 225 Index rose half a percent to 40,109.23, surpassing the crucial 40,000 level for the first time, led by tech stocks. The broader Topix Index settled 0.1 percent lower at 2,706.28.

Advantest rallied 3.7 percent and Renesas Electronics surged 4.9 percent on expectations of a boom in artificial intelligence.

Seoul stocks rallied on extended buying by overseas investors. The Kospi jumped 1.2 percent to 2,674.27 led by financial and technology stocks.

Investors cheered data showing that South Korean industrial output rose for the third consecutive month in January.

Ecopro shares climbed 2.4 percent after the battery manufacturer said it would introduce the Closed Loop System V2, integrating eco-friendly technology, at battery-focused events in South Korea and Japan.

Australian markets edged down slightly after mixed readings on company profits and building approvals. The benchmark S&P/ASX 200 Index dipped 0.1 percent to 7,735.80, while the broader All Ordinaries Index ended down 0.1 percent at 7,996.50.

Mining and energy stocks led losses ahead of Q4 GDP data due on Wednesday. Lithium miner Lake Resources slumped 11.1 percent after announcing job cuts to further reduce losses.

Renewable energy firm Genex Power soared 32.4 percent after it received a takeover offer from Japan’s Electric Power Development.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index dropped 0.2 percent to 11,724.21 after data showed Q4 terms of trade dropped from the previous quarter.

Europe

European stocks are mixed on Monday as investors await cues from the U.K. Spring Budget, Fed Chair Jerome Powell’s congressional testimony and the interest rate decision from the European Central Bank.

In economic news, a survey showed the Eurozone Sentix Investor Confidence Index rose from -12.9 in February to -10.5 in March.

While the French CAC 40 Index is up by 0.1 percent, the German DAX Index is just below the unchanged line and the U.K.’s FTSE 100 Index is down by 0.7 percent.

ING has advanced. The Dutch banking major announced that it plans to buy back up to 50 million euros of common shares.

Spanish banker Banco Santander is slightly lower on a Bloomberg report that it has cut about 320 jobs in the U.S. to focus more on digital operations.

British healthcare software specialist Craneware has gained as it reported an 8 percent rise in revenue during the second half of last year.

Halma is marginally lower. The health tech company announced that it has acquired Rovers Medical Devices BV.

Low-cost airline Wizz Air Holdings has moved to the downside after reporting a 3.3 percent decrease in the load factor last month.

Boeing supplier Senior has also declined 1.1 percent despite posting strong financial results for the year ended 31 December 2023.

BNP Paribas has risen in Paris. The French financial services major has announced the launch of a share repurchase program of 1.055 billion euros.

German chemicals firm Evonik has also moved higher after an announcement that it would cut up to 2,000 jobs globally by 2026 in order to reduce costs.

Henkel has dropped more than 2 percent after the chemical and consumer goods company warned of slower sales growth this year.

Delivery Hero shares have soared. The online food ordering and delivery company has launched a finance transaction that will amend and extend its 1.1-billion-euro equivalent term facilities and raise around 500-million-euro equivalent term facility.

Rheinmetall has also gained. The company said it has won an order to supply a European member of NATO with multiple rocket launcher ammunition.

U.S. Economic Reports

Philadelphia Federal Reserve President Patrick Harker is scheduled to speak on the “Economic Impact of Higher Education” before the 2024 American Council on Education Presidents and Chancellors Summit at 11 am ET.