Futures Pointing To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to move to the upside following a weak performance last week.

After turning in a mixed performance throughout much of the session, the major U.S. stock indexes all rallied going into the close of trading on Friday. The Dow showed a substantial move to the upside, bouncing off its lowest closing level in almost a month.

The Dow surged 574.84 points or 1.5 percent to 38,686.32, while the S&P 500 advanced 42.03 points or 0.8 percent to 5,277.51 after spending most of the day in negative territory.

The tech-heavy Nasdaq ended the day down 2.06 points or less than a tenth of a percent at 16,735.02 but showed a substantial recovery after tumbling by as much as 1.7 percent earlier in the session.

For the week, the S&P 500 fell by 0.5 percent and the Dow and the Nasdaq slumped by 1.0 percent and 1.1 percent, respectively, although the major averages all posted strong gains for the month of May.

The mostly higher close on Wall Street came following the release of a highly anticipated Commerce Department report showing consumer prices in the U.S. increased in line with economist estimates in the month of April, while core consumer prices edged up by slightly less than expected.

The Commerce Department said its personal consumption expenditures (PCE) price index rose by 0.3 percent for the third straight month in April, matching economist estimates.

Meanwhile, the report said the core PCE price index, which excludes food and energy prices, crept up by 0.2 percent in April after rising by 0.3 percent in March. Economists had expected another 0.3 percent increase.

The annual rates of growth by the PCE price index and the core PCE price index were both unchanged from the previous month at 2.7 percent and 2.8 percent, respectively. The readings matched expectations.

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending.

The Commerce Department said real personal spending, which excludes price changes, edged down by 0.1 percent in April after climbing by 0.4 percent in March.

“We are in a be-careful-what-you-wish-for moment because if slowing consumer spending leads to lower inflation and the Fed is able to cut slowly as a result then that will be good for markets,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

He added, “However, if consumer spending – and the economy – slows too quickly then corporate profits and stock prices will go down much more quickly than the Fed will be able to cut rates, so we would be careful at this point.”

Telecom stocks moved sharply higher over the course of the session, driving the NYSE Arca North American Telecom Index up by 2.8 percent to its best closing level in well over two-months.

Significant strength was also visible among interest rate-sensitive utilities stocks, as reflected by the 2.6 percent surge by the Dow Jones Utility Average.

Energy stocks also saw considerable strength despite a decrease by the price of crude oil, with the NYSE Arca Oil Index and the Philadelphia Oil Service Index jumping by 2.4 percent and 2.1 percent, respectively.

Commercial real estate, banking and transportation stocks also moved notably higher, while computer hardware stocks saw substantial weakness, dragging the NYSE Arca Computer Hardware Index down by 3.1 percent.

Dell Technologies (DELL) led the sector lower, plummeting by 17.9 percent after reporting better than expected first quarter results but forecasting its gross margin will pull back roughly 150 basis points in 2025.

Commodity, Currency Markets

Crude oil futures are inching up $0.18 to $77.17 a barrel after slumping $0.92 to 76.99 a barrel last Friday. Meanwhile, after sliding $20.70 to $2,345.80 an ounce in the previous session, gold futures are edging up $2.10 to $2,347.90 an ounce.

On the currency front, the U.S. dollar is trading at 156.78 yen versus the 157.31 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0846 compared to last Friday’s $1.0848.

Asia

Asian stocks rallied on Monday as soft U.S. inflation data revived rate cut hopes and a private survey showed China’s factory activity grew the fastest in about two years in May due to production gains and new orders.

Indian markets led regional gains as exit polls indicated Prime Minister Narendra Modi is likely to win a third consecutive term in office. If Modi wins, he will become the second Indian leader to retain power for a third term after Jawaharlal Nehru.

The dollar began the week on a sluggish note while oil and gold prices were little changed in Asian trading as mediators urged Israel and Hamas to agree to a truce and hostage release deal outlined by the U.S.

Chinese shares ended a choppy session slightly lower despite upbeat manufacturing data. The benchmark Shanghai Composite index dropped 0.27 percent to 3,078.49.

Hong Kong’s Hang Seng index jumped 1.79 percent to 18,403.04, led by technology stocks after NVIDIA Corporation unveiled a new line of artificial intelligence chips.

Japanese markets rose sharply after a survey revealed the health of Japan’s manufacturing economy improved for the first time in a year during May.

The Nikkei average climbed 1.13 percent to 38,923.03 while the broader Topix index settled 0.92 percent higher at 2,798.07.

Financials topped the gainers list on expectations that they would benefit from a higher interest rate environment. Daiwa Securities Group surged 5.6 percent and Nomura Holdings jumped 4 percent.

Automakers ended lower after the transport ministry said it found irregularities in model applications from five major auto companies.

Toyota Motors dipped 1.8 percent and Mazda Motor gave up 3.3 percent.

Seoul stocks advanced as a survey showed South Korea’s factory activity expanded in May at the fastest pace in two years.

The Kospi average rallied 1.74 percent to 2,682.52, with tech heavyweights Samsung Electronics and SK Hynix surging around 3 percent each.

Australian stocks rose notably as the latest manufacturing data pointed to economic recovery.

The benchmark S&P/ASX 200 rose 0.77 percent to 7,761, led by gains in the mining and financial sectors. The broader All Ordinaries index closed 0.67 percent higher at 8,024.10.

Europe

European stocks traded higher on Monday amid bets that the European Central Bank (ECB) will deliver its first interest-rate cut of the cycle on Thursday.

Also helping underpin investor sentiment, Eurozone manufacturing PMI was finalized at 47.3 in May, up from April’s 45.7 and reaching a 14-month high.

Elsewhere, a survey by S&P Global showed manufacturing in the U.K. increased to 51.2 in May, up from April’s 49.1 and marking the highest reading since July 2022.

The pan European STOXX 600 was up 0.6 percent at 521.33, extending gains for a third consecutive session.

The German DAX jumped 1 percent, France’s CAC 40 added 0.6 percent and the U.K.’s FTSE 100 was up 0.3 percent.

In corporate news, Sweden’s Ericsson rose nearly 2 percent after saying that a four-year program to monitor the company’s compliance with a U.S. anti-corruption agreement had ended on June 2.

British drug maker GSK plunged 9.2 percent after a state court in Delaware found legitimate evidence that links its Zantac heartburn drug to cancer, allowing more than 70,000 lawsuits over these cases.

Sirius Real Estate added 1.8 percent. The owner and operator of branded business and industrial parks in Germany and the U.K. has announced a higher FFO for the year ended March 31, 2024.

Cerillion, a provider of billing, charging and customer management systems to the telecoms industry, rose 1.3 percent after announcing a project with Virgin Media Ireland.

U.S. Economic Reports

The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of May at 10 am ET. The ISM’s manufacturing PMI is expected to inch up to 49.6 in May from 49.2 in April, but a reading below would still indicate contraction.

Also at 10 am ET, the Commerce Department is due to release its report on construction spending in the month of April. Construction spending is expected to rise by 0.2 percent in April after dipping by 0.2 percent in March.