Profit Taking May Contribute To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Monday, with stocks likely to give back ground following recent strength.

Traders may look to cash in on the recent strength in the markets, which has seen the major averages close higher for six consecutive weeks.

The advance has lifted the Dow and the S&P 500 to record highs, while the Nasdaq is also closing in on the record highs the tech-heavy index set in July.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of a slew of corporate earnings news from big-name companies.

3M (MMM), General Motors (GM), Verizon (VZ), Boeing (BA), Coca-Cola (KO), IBM Corp. (IBM), Tesla (TSLA) and UPS (UPS) are among the companies due to report their quarterly results this week.

Reports on durable goods orders and new and existing home sales are also likely to attract attention in the coming days along with the Federal Reserve’ Beige Book.

After ending Thursday’s session little changed, stocks moved mostly higher during trading on Friday. The tech-heavy Nasdaq led the charge, while the Dow ended the day modestly higher at a new record closing high.

The Nasdaq climbed 115.94 points or 0.6 percent to 18,489.55 and the S&P 500 rose 23.20 points or 0.4 percent to a new record closing high of 5,864.67. The narrower Dow recovered from an initial pullback to end the day up by 36.86 points or 0.1 percent at 43,275.91.

For the week, the Dow jumped by 1.0 percent, while the S&P 500 and the Nasdaq advanced by 0.9 percent and 0.8 percent, respectively.

The Nasdaq benefitted from a sharp increase by shares of Netflix (NFLX), as the streaming giant soared by 11.1 percent to a record closing high.

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

The strength on Wall Street may also have reflected ongoing optimism about the outlook for the U.S. economy following yesterday’s largely upbeat batch of data.

Meanwhile, a steep drop by shares of American Express (AXP) limited the upside for the Dow, with the credit card giant tumbling by 3.2 percent.

American Express came under pressure after reporting third quarter earnings that beat expectations but weaker than expected revenues.

In U.S. economic news, the Commerce Department released a report showing a modest pullback by housing starts in the month of September.

The Commerce Department said housing starts fell by 0.5 percent to an annual rate of 1.354 million in September after spiking by 7.8 percent to a revised rate of 1.361 million in August.

Economists had expected housing starts to dip by 0.4 percent to an annual rate of 1.350 million from the 1.356 million originally reported for the previous month.

The report also showed a sharp pullback by building permits, which tumbled by 2.9 percent to an annual rate of 1.428 million in September after surging by 4.6 percent to a revised rate of 1.470 million in August.

Building permits, an indicator of future housing demand, were expected to slump by 1.0 percent to an annual rate of 1.460 million from the 1.475 million originally reported for the previous month.

Gold stocks showed a substantial move to the upside, driving the NYSE Arca Gold Bugs Index up by 4.8 percent to its best closing level in almost four years. The rally by gold stocks came as the price of the precious metal reached new record highs.

Considerable strength was also visible among airline stocks, with the NYSE Arca Airline Index soaring by 3.0 percent to a six-month closing high.

Telecom stocks also saw significant strength on the day, as reflected by the 2.5 percent surge by the NYSE Arca Telecom Index.

Retail and housing stocks also showed notable moves to the upside, while oil service stocks moved sharply lower along with the price of crude oil.

Commodity, Currency Markets

Crude oil futures are jumping $1.21 to $70.43 a barrel after tumbling $1.45 to $69.22 a barrel last Friday. Meanwhile, after climbing $22.50 to $2,730 an ounce in the previous session, gold futures are advancing $22.30 to $2,752.30 an ounce.

On the currency front, the U.S. dollar is trading at 149.81 yen versus the 149.53 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0856 compared to last Friday’s $1.0867.

Asia

Asian stocks turned in a mixed performance on Monday as China’s central bank once again cut interest rates and the country’s banks slashed borrowing costs to combat the country’s stubborn economic slump.

The dollar fell as global finance chiefs gather in Washington this week amid intense uncertainty over wars in the Middle East and Europe and around the U.S. presidential election.

Gold reached another record high, while oil prices recovered some ground after having fallen nearly 8 percent last week on Chinese demand concerns.

Israel opened up a fresh military assault on Hezbollah’s strongholds in Lebanon a day after a drone exploded next to Prime Minister Benjamin Netanyahu’s private home.

Israel has already vowed to retaliate against Iran for a missile attack at the start of October.

China’s Shanghai Composite Index ended 0.20 percent higher at 3,268.11 after a volatile session as the People’s Bank of China cut the one- and five-year LPRs by 25 basis points to 3.1 percent and 3.6 percent, respectively.

Hong Kong’s Hang Seng Index slumped 1.6 percent to 20,478.46 as tech stocks declined and investors awaited earnings from prominent companies, including Ping An and HKEX.

Japanese markets ended little changed on fading BoJ rate hike bets and ahead of the general election at the end of this week. The Nikkei 225 Index finished marginally lower at 38,954.60, while the broader Topix Index settled 0.3 percent lower at 2,679.91.

Seoul stocks eked out modest gains to snap a three-day losing streak. The Kospi rose 0.4 percent to 2,604.92, with Hyundai Motor, Korean Air and Jeju Air climbing 1-3 percent.

Australian markets advanced as higher commodity prices boosted mining and energy stocks. The benchmark S&P/ASX 200 Index climbed 0.7 percent to 8,344.40, while the broader All Ordinaries Index closed 0.6 percent higher at 8,604.10.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index rose 0.8 percent to 12,923.22, nearing the 13,000 points mark for the first time since 2021.

Europe

European stocks have moved mostly lower on Monday, even as higher commodity prices boost mining and energy stocks.

The euro was under pressure in the absence of high-tier data releases, while the British pound weakened amid strength in the dollar but remained above the $1.30 level.

ECB policymaker Gediminas Simkus said today that rates could get lower than the natural level between 2 percent and 3 percent, if a fall in inflation becomes entrenched.

While the U.K.’s FTSE 100 Index has slipped by 0.2 percent, the German DAX Index and the French CAC 40 Index are both down by 0.8 percent.

FirstGroup has moved to the upside after confirming the acquisition of coach company Anderson Travel.

Hollywood Bowl has also rallied. The ten-pin bowling operator said it expects to beat market forecasts for adjusted earnings in fiscal 2024.

Finnish network company Nokia Oyj has also advanced as it announced a new partnership with Vietnam Posts and Telecommunications Group to deploy 5G technology.

Dutch coffee maker JDE Peets has soared after appointing a new CEO and confirming its 2024 outlook.

Norway’s biggest lender DNB Bank has also risen after it entered into an agreement to acquire all the shares of Carnegie Holding AB, from Altor and the minority shareholders for a total consideration of approximately 12 billion Swedish kronor.

Forvia, the world’s seventh largest car parts supplier by revenue, has also surged after beating third quarter sales expectations.

Meanwhile, French pharmaceutical company Sanofi is moving lower after it has entered into exclusive negotiations to sell a 50 percent controlling stake in its consumer healthcare business, Opella, to private equity firm CD&R.

Reinsurance giant Munich Re has also shown a notable move to the downside after Jefferies cut its rating on the stock.

U.S. Economic News

The Conference Board is scheduled to release its report on leading economic indicators in the month of September at 10 am ET. The leading economic index is expected to decrease by 0.3 percent in September after slipping by 0.2 percent in August.

At 1 pm ET, Minneapolis Federal Reserve President Neel Kashkari is due to participate in a Chippewa Falls Chamber of Commerce town hall.

Kansas City Federal Reserve President Jeffrey Schmid is scheduled to speak on the economic and monetary policy outlook before a hybrid event hosted by the Chartered Financial Analyst Society, Kansas City at 5:05 pm ET.