U.S. Stocks May See Further Upside In Early Trading

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to add to the gains posted in the previous session.

A positive reaction to some of the latest earnings news may generate early buying interest, with shares of Bank of America (BAC) moving notably higher in pre-market trading after the financial giant reported better than expected second quarter earnings.

Health insurance giant UnitedHealth (UNH) is also likely to move to the upside after reporting second quarter earnings that exceeded analyst estimates.

On the other hand, shares of Morgan Stanley (MS) are seeing significant pre-market weakness even though the company reported better than expected second quarter earnings.

Traders are also digesting the latest U.S. economic news, including a Commerce Department report showing U.S. retail sales came in unchanged in the month of June.

The Commerce Department said retail sales came in flat in June after rising by an upwardly revised 0.3 percent in May.

Economists had expected retail sales to come in unchanged compared to the 0.1 percent uptick originally reported for the previous month.

Excluding a sharp drop in sales by motor vehicle and parts dealers, retail sales climbed by 0.4 percent in June after inching up by 0.1 percent in May. Ex-auto sales were expected to creep up by 0.1 percent.

The Labor Department released a report on Tuesday showing import prices in the U.S. were unexpectedly flat in the month of June.

The report said import prices were unchanged in June after dipping by a revised 0.2 percent in May. Economists had expected import prices to rise by 0.2 percent compared to the 0.4 percent decrease originally reported for the previous month.

Meanwhile, the Labor Department said export prices declined by 0.5 percent in June after falling by a revised 0.7 percent in May.

Export prices were expected to edge down by 0.1 percent compared to the 0.6 percent decrease originally reported for the previous month.

U.S. stocks closed on a firm note on Monday, with two of the three major indices moving on to record fresh highs thanks to strong buying at several counters from across various sectors.

Optimism about interest rate cuts by the Fed and rising prospects of former President Donald Trump winning the upcoming presidential elections rendered the mood positive on Wall Street.

The Dow ended up 210.82 points or 0.5 percent at 40,211.72 after scaling a new high at 40,351.10. The S&P 500, which climbed to a new high of 5,666.94, settled at 5,631.22, gaining 15.87 points or 0.3 percent, while the Nasdaq ended with a gain of 74.12 points or 0.4 percent at 18,472.57, after hitting a high of 18,641.53.

Caterpillar climbed more than 3 percent. Goldman Sachs gained about 2.6 percent on strong second quarter results.

JP Morgan Chase and American Express gained 2.5 percent, and 2.3 percent, respectively. Apple, Visa, Chevron, Travelers Companies, Walmart and UnitedHealth Group also closed on a firm note.

Netflix, Adobe Inc, Costco Wholesale Corp, Qualcomm, Tesla, Automatic Data Processing and Marriott International closed with strong gains.

Nike ended down nearly 3 percent. Boeing, Verizon Communications, 3M, Procter & Gamble, McDonald’s and Amazon lost 0.9 to 2 percent.

Trump Media & Technology shares zoomed nearly 32 percent amid huge volumes, following Trump’s fortunate escape from the assassination attempt in Pennsylvania on Saturday.

In economic news, a report released by the Federal Reserve Bank of New York showed regional manufacturing activity contracted at a slightly faster rate in the month of July.

The New York Fed said its general business conditions index edged down to a negative 6.6 in July from a negative 6.0 in June, with a negative reading indicating contraction. Economists had expected the index to come in unchanged.

Fed Chair Jerome Powell, who spoke at the Economic Club of Washington D.C., said that the central bank will not wait until inflation hits 2 percent to cut interest rates.

Powell referenced the idea that central bank policy works with “long and variable lags” to explain why the Fed wouldn’t wait for its target to be hit.

“The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%,” Powell said.

Commodity, Currency Markets

Crude oil futures are tumbling $1.43 to $80.48 a barrel after slipping $0.30 to $81.91 a barrel on Monday. Meanwhile, after climbing $8.20 to $2,428.90 an ounce in the previous session, gold futures are rising $9 to $2,437.90 an ounce.

On the currency front, the U.S. dollar is trading at 158.77 yen compared to the 158.06 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0881 compared to yesterday’s $1.0894.

Asia

Asian stocks fluctuated before ending mixed on Tuesday despite strength on Wall Street overnight. Investors weighed the case for a September rate cut after comments by Fed Chair Jerome Powell that the three inflation readings over the second quarter of this year showed “more progress.”

With the odds for a Trump presidency increasing, markets also grappled with the concept of the “Trump Trade,” which implies deregulation, tax cuts, and increased fiscal spending.

The dollar rebounded after a recent streak of losses and gold nudged higher toward record highs, while oil extended losses on worries about Chinese demand.

China’s Shanghai Composite Index finished marginally higher at 2,976.30 and Hong Kong’s Hang Seng Index fell 1.6 percent to 17,727.98 due to concerns over a further escalation in geopolitical conflicts if Donald Trump wins the White House again in November.

Japanese markets ended slightly higher, with the Nikkei 225 Index rising 0.2 percent to 41,275.08 as traders returned to their desks after a holiday the previous day. The broader Topix Index settled 0.3 percent higher at 2,904.50.

A weak yen lifted some export-oriented shares. Defense-related shares also surged, with Mitsubishi Heavy Industries and Kawasaki Heavy Industries climbing 5 percent and 6.2 percent, respectively.

Electronic components maker TDK jumped 5.4 percent, while Uniqlo parent Fast Retailing fell 1.3 percent.

Seoul stocks posted modest gains, with the Kospi rising 0.2 percent to 2,866.09.

Australian markets ended lower as investors awaited June jobs data for directional cues. The benchmark S&P/ASX 200 Index slipped 0.2 percent to 7,999.30, snapping a three-day winning streak. The broader All Ordinaries Index closed down 0.2 percent at 8,243.30.

Banks edged up slightly to extend gains for a sixth day running while mining stocks suffered losses after Rio Tinto reported second-quarter iron ore shipments below analyst estimates.

Rio Tinto closed 2.5 percent lower after hitting its weakest level since March 18 earlier. Peer BHP gave up 1.4 percent.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index rose 0.5 percent to 12,184.49 ahead of inflation data for the second quarter due on Wednesday that might influence the central bank’s monetary policy stance.

Europe

European stocks have fallen in cautious trading on Tuesday after analysts warned the euro area’s economy, including the zone’s gross domestic product, could be impacted if Donald Trump were to win the presidential election in November.

Investors are also reacting to the results of a survey that showed German investor morale worsened more than expected in July.

The ZEW Economic Sentiment index fell from 47.5 to 41.8 in July, below expectation of 44.3 and marking the first decline in a year since July 2023.

While the French CAC 40 Index has slid by 0.7 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both down by 0.4 percent.

SCOR plummeted 26 percent. The French reinsurer issued a profit warning, saying it currently expects L&H insurance service result for the second quarter to be a loss of 0.4 billion euros, primarily driven by updates on reserves, and continued negative experience variance.

Luxury group Richemont rose over 1 percent as it reported a marginal rise in sales at constant exchange rates in the three months through June.

German fashion house Hugo Boss plummeted 9 percent as the company lowered its full-year outlook after a challenging second quarter amid weakening consumer demand in markets such as China and the U.K.

Miners slipped in London as copper prices eased on concerns about weakening Chinese demand. Anglo American, Antofagasta and Glencore fell 1-2 percent.

Rio Tinto gave up 2.5 percent after reporting second-quarter iron ore shipments below estimates.

Ocado shares jumped 15 percent after the online grocer raised profit forecasts for its key technology division.

B&M European Value Retail rallied 3.4 percent. The discount retailer sounded optimistic about achieving profitable, cash-generating growth for the full financial year after reporting a 2.4 percent revenue increase in Q1 FY2024.

Credit reporting company Experian declined 1.6 percent after the announcement of its chief operating officer’s departure.

U.S. Economic News

With steep declines in auto and gasoline sales offset by strength in other areas, the Commerce Department released a report on Tuesday showing U.S. retail sales came in unchanged in the month of June.

The Commerce Department said retail sales came in flat in June after rising by an upwardly revised 0.3 percent in May.

Economists had expected retail sales to come in unchanged compared to the 0.1 percent uptick originally reported for the previous month.

Excluding the sharp drop in sales by motor vehicle and parts dealers, retail sales climbed by 0.4 percent in June after inching up by 0.1 percent in May. Ex-auto sales were expected to creep up by 0.1 percent.

The Labor Department also released a report on Tuesday showing import prices in the U.S. were unexpectedly flat in the month of June.

The report said import prices were unchanged in June after dipping by a revised 0.2 percent in May. Economists had expected import prices to rise by 0.2 percent compared to the 0.4 percent decrease originally reported for the previous month.

Meanwhile, the Labor Department said export prices declined by 0.5 percent in June after falling by a revised 0.7 percent in May.

Export prices were expected to edge down by 0.1 percent compared to the 0.6 percent decrease originally reported for the previous month.

At 10 am ET, the National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of July. The housing market index is expected to inch up to 44 in July from 43 in June.

The Commerce Department is also due to release its report on business inventories in the month of June at 10 am ET. Business inventories are expected to rise by 0.3 percent.

At 2:45 pm ET, Federal Reserve Board Governor Adriana Kugler is scheduled to speak before the 21st Annual National Association for Business Economics Foundation Economic Measurement Seminar.