Traders May Take A Breather Following Recent Strength On Wall Street

The major U.S. index futures are currently pointing to a roughly flat open on Tuesday, with stocks likely to show a lack of direction after ending the previous session notably higher.

Traders may take a step back to digest recent strength in the markets, which has lifted the Dow and the S&P 500 to new record highs.

Shares of Goldman Sachs (GS) are likely to see initial strength, however, with the investment bank jumping by 2.9 percent in pre-market trading.

The surge by Goldman Sachs comes after the company reported third quarter results that exceeded analyst estimates on both the top and bottom lines.

Financial giant Bank of America (BAC) may also move to the upside after reporting better than expected third quarter earnings.

Meanwhile, shares of UnitedHealth (UNH) may come under pressure after the health insurance giant reported third quarter results that beat expectations but lowered the top end of its full-year earnings guidance.

Following the strong upward move seen during last Friday’s session, stocks saw further upside during trading on Monday. The major averages all moved higher on the day, with the Dow and the S&P 500 reaching new record closing highs.

The major averages reached new highs for the session late in the day before giving back some ground going into the close. The Dow rose 201.36 points or 0.5 percent to 43,065.22, the Nasdaq jumped 159.75 points or 0.9 percent to 18,502.69 and the S&P 500 climbed 44.82 points or 0.8 percent to 5,859.85.

The continued strength on Wall Street came amid optimism about the outlook for interest rates following last Friday’s report on producer price inflation.

The Labor Department report showed producer prices were unexpectedly unchanged in September, while the annual rate price growth slowed modestly.

While hopes the Federal Reserve will lower rates by another 50 basis points next month have largely evaporated, the data reinforced optimism the central bank will cut rates by 25 basis points.

CME Group’s FedWatch Tool is currently indicating an 86.1 percent chance the Fed will cut rates by a quarter point at its November meeting.

Overall trading activity was somewhat subdued, however, with some traders likely away from their desks due to the Columbus Day holiday.

A lack of major U.S. economic data may also have kept some traders on the sidelines ahead of the release of key reports on retail sales and industrial production later in the week.

Semiconductor stocks turned in some of the market’s best performances on the day, with the Philadelphia Semiconductor Index jumping by 1.8 percent.

Considerable strength was also visible among housing stocks, as reflected by the 1.6 percent gain posted by the Philadelphia Housing Sector Index.

Airline, utilities and banking stocks also saw significant strength, while networking stocks showed a notable move to the downside.

Commodity, Currency Markets

Crude oil futures are plunging $2.98 to $70.85 a barrel after tumbling $1.73 to $73.83 a barrel on Monday. Meanwhile, after falling $10.70 to $2,665.60 an ounce in the previous session, gold futures are rising $7.10 to $2,672.70 an ounce.

On the currency front, the U.S. dollar is trading at 149.01 yen compared to the 149.76 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0911 compared to yesterday’s $1.0909.

Asia

Asian stocks rose broadly on Tuesday, with Japanese markets leading regional gains after Prime Minister Shigeru Ishiba reportedly said his government is aiming to compile a supplementary budget for the current fiscal year in excess of last year’s 13.1 trillion yen ($87.6 billion) to fund an economic support package.

Chinese and Hong Kong markets underperformed after weekend announcements from authorities about economic support failed to inspire confidence among investors.

Gold ticked lower and the dollar rose to a two-month high after Federal Reserve Governor Christopher Waller called for more caution on interest rate cuts.

Oil prices fell nearly 4 percent and were down for a third straight session after U.S. media reported that a planned retaliatory attack by Israel on Iran won’t target nuclear or oil facilities, easing immediate concerns about supply disruptions.

China’s Shanghai Composite Index tumbled 2.5 percent to 3,201.29 as the size of Beijing’s planned fiscal boost remained unclear.

Hong Kong’s Hang Seng Index plummeted 3.7 percent 20,318.79, dragged down by tech and real estate stocks.

Media outlet Caixin reported that China may raise an additional 6 trillion yuan ($850 billion) from ultra-long special government bonds over three years to help bolster a sagging economy.

Japanese shares rose notably, and the yen dipped from a 2-1/2 month high on optimism about the U.S. economic outlook and amid bets that the Bank of Japan will forgo raising interest rates again this year.

The Nikkei average climbed 0.8 percent to 39,910.55, extending gains for a fourth straight session. The broader Topix Index settled 0.6 percent higher at 2,723.57 as traders returned from a national holiday.

Seoul stocks closed higher for a third day running, with tech shares leading the advance. Heavyweight Samsung Electronics edged up 0.3 percent and its chipmaking rival SK Hynix surged 2.9 percent. The Kospi rose 0.4 percent to 2,633.45.

Australian markets hit a new record high, with banks and mining stocks leading the way. The benchmark S&P/ASX 200 Index rose 0.8 percent to 8,318.40, while the broader All Ordinaries Index closed 0.8 percent higher at 8,598.60.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index gained 0.6 percent to close at 12,840.77.

Europe

European shares are turning in a mixed performance on Tuesday after two days of gains. A slew of mixed regional data and Middle East concerns has weighed on sentiment heading into Thursday’s ECB meeting.

Germany’s wholesale prices fell at the steepest pace in five months in September, while investor confidence in the country improved for the first time in four months, separate data revealed.

French consumer price inflation slowed slightly more than initially estimated in September to the lowest level in three-and-a-half years due to cheaper energy costs, statistical office INSEE reported.

Elsewhere, data showed U.K. wage growth softened to the lowest in more than two years in the three months to August, adding support to expectations that the central bank will cut interest rates further at the next meeting.

While the German DAX Index is up by 0.3 percent, the U.K.’s FTSE 100 Index is down by 0.4 percent and the French CAC 40 Index is down by 0.9 percent.

Energy giant BP Plc and peer Shell have tumbled as oil prices slid as much as $3 to a nearly two-week low on the back of a weaker demand forecast from IEA and reports Israel’s planned retaliatory attack on Iran won’t target nuclear or oil facilities.

Office-rental company Workspace Group has also moved to the downside after like-for-like occupancy fell due to an unusually high number of customers vacating in the second quarter.

TotalEnergies SE shares have also slumped in Paris. The oil major warned that its third-quarter downstream results are expected to decline sharply due to lower refining margins in Europe and elsewhere.

Deutsche Bank has also dropped after reports of the sale of some 16 million shares in the German bank priced at 16.01 euros ($17.43) per share.

Meanwhile, LM Ericsson shares have surged in Stockholm after the Swedish telecom major reported a profit in its third quarter compared to the prior year’s loss.

Bellway has also soared after the company delivered a reassuring assessment on the state of the U.K.’s housing market recovery.

Tele2 AB has also advanced after an announcement that it has appointed Jean-Marc Harion as President and CEO, effective from November 10, 2024.

U.S. Economic News

Following a significant turnaround in the previous month, the Federal Reserve Bank of New York released a report on Tuesday showing regional manufacturing activity has returned to contraction in the month of October.

The New York Fed said its general business conditions index tumbled to a negative 11.9 in October from a positive 11.5 in September, with a negative reading indicating contraction. Economists had expected the index to decrease to a positive 2.3.

Despite the downturn in October, the New York Fed said optimism about the six-month outlook grew strongly, with the index for future business activity jumping to a multi-year high of 38.7 in October from 30.6 in September.

At 11:30 am ET, San Francisco Federal Reserve President Mary Daly is due to speak and participate in a moderated conversation at an event hosted by the New York University Stern School of Business.

Federal Reserve Board Governor Adriana Kugler is scheduled to participate in a moderated discussion before the “Exploring Careers in Economics” webcast conference at 1 pm ET.

At 7 pm ET, Atlanta Federal Reserve President Raphael Bostic is due to participate in a moderated conversation on the economic outlook and the impact on small business with the Gathering Spot.