U.S. Stocks May Lack Direction Following Last Week’s Pullback

The major U.S. index futures are currently pointing to a roughly flat open on Monday, with stocks likely to show a lack of direction following the sell-off seen last Friday.

Traders may take a step back to assess the recent volatility on Wall Street, which saw stocks rally to record highs on the heels of President-elect Donald Trump’s decisive victory before pulling back sharply last week.

Concerns about the outlook for interest rates weigh on the markets last week along with worries about the impact of Trump’s proposed policies and cabinet nominees.

Investors may also be reluctant to make significant moves ahead of the release of quarterly results from AI darling Nvidia (NVDA).

Nvidia, which has recently been a driver of the markets, is scheduled to release its fiscal third quarter results after the close of trading on Wednesday.

The economic calendar is also relatively quiet this week compared to last week, although reports on housing starts, existing home sales and weekly jobless claims may still attract attention.

After coming under pressure late in Thursday’s session, stocks showed a more substantial move to the downside during trading on Friday. The major averages all moved sharply lower on the day, pulling back well off Monday’s record closing highs.

The major averages climbed off their worst levels in late-day trading but remained firmly negative. The tech-heavy Nasdaq led the way lower, plunging 427.53 points or 2.2 percent to 18,680.12.

The S&P 500 also tumbled 78.55 points or 1.3 percent to 5,870.62, while the narrower Dow slid 305.87 points or 0.7 percent to 43,444.99.

With the steep drop on the day, the major averages also moved significantly lower for the week. The Nasdaq dove by 3.2 percent, the S&P 500 tumbled by 2.1 percent and the Dow slumped by 1.2 percent.

The sell-off on Wall Street came amid concerns about the outlook for interest rates following Federal Reserve Chair Powell’s remarks on Thursday suggesting the central bank doesn’t need to hurry to lower rates.

Citing the strength of the U.S. economy, Powell said the Fed can take a careful approach to future monetary policy decisions.

The Fed is still seen as likely to lower interest rates next month, but CME Group’s FedWatch Tool suggests the chances of a quarter point rate cut have fallen to 58.4 percent from 72.2 percent on Thursday.

Potentially adding to concerns economic strength will lead the Fed to hold off on future rate cuts, the Commerce Department released a report showing retail sales increased by slightly more than expected in October.

The Commerce Department said retail sales rose by 0.4 percent in October after growing by an upwardly revised 0.8 percent in September.

Economists had expected retail sales to climb by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

The Labor Department also released a report showing unexpected increases by import and export prices in the month of October, which may have added to recent worries about sticky inflation.

“Strong retail sales, underpinned by stronger revisions, underscores a resilient consumer but higher than expected import/export prices puts the Fed on further alert for hotter inflation as they assess whether a pause – rather than another rate cut – is more appropriate at its next Fed meeting,” said Quincy Krosby, Chief Global Strategist for LPL Financial.

Meanwhile, the Fed released a report showing industrial production decreased in October, as the effects of recent hurricanes and the since-resolved strike at Boeing (BA) continued to weigh on growth.

Biotechnology stocks moved sharply lower on news President-elect Donald Trump has picked vaccine skeptic Robert F. Kennedy Jr. as Health and Human Services Secretary.

Reflecting the weakness in the sector, the NYSE Arca Biotechnology Index plunged by 3.4 percent to a three-month closing low.

Substantial weakness was also visible among semiconductor stocks, as reflected by the 2.4 percent slump by the Philadelphia Semiconductor Index. The index tumbled to its lowest closing level in over two months.

Semiconductor equipment maker Applied Materials (AMAT) led the sector lower after reporting better than expected fiscal fourth quarter results but providing disappointing revenue guidance for the current quarter.

Pharmaceutical, networking, software and retail stocks also saw considerable weakness, while utilities stocks were among the few groups to buck the downtrend.

Commodity, Currency Markets

Crude oil futures are climbing $0.51 to $67.53 a barrel after tumbling $1.68 to $67.02 a barrel last Friday. Meanwhile, after edging down $2.80 to $2,570.10 an ounce in the previous session, gold futures are surging $36.50 to $2,606.60 an ounce.

On the currency front, the U.S. dollar is trading at 154.91 yen versus the 154.30 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0560 compared to last Friday’s $1.0540.

Asia

Asian stocks turned in a mixed performance on Monday due to renewed concerns over Trump’s potential tariffs and uncertainty over the Fed’s policy.

The dollar rose against the yen in Asian trading and oil eked out modest gains amid signs of escalating tensions between Russia and Ukraine. Gold rose nearly 1 percent after witnessing a sharp decline last week.

China’s Shanghai Composite Index ended 0.2 percent lower at 3,323.85, giving up early gains.

Hong Kong’s Hang Seng Index climbed 0.8 percent to 19,576.61 after China’s securities regulator said it would expand the scope of stock eligible to trade via Stock Connect.

Japanese markets fell sharply as Bank of Japan Governor Kazuo Ueda affirmed that the door remains open to more rate hikes and the central bank is seeking more clarity on U.S. economic policy under the incoming administration of President-elect Donald Trump.

Investors also digested downbeat data showing that Japanese core machinery orders fell for a second consecutive quarter.

The Nikkei 225 Index slumped 1.1 percent to 38,220.85, while the broader Topix Index settled 0.7 percent lower at 2,691.76.

Pharmaceutical stocks fell the most after Trump nominated vaccine skeptic Robert F. Kennedy Jr. as the U.S. Secretary for Health and Human Services.

Seoul stocks rallied, with the Kospi surging 2.2 percent to 2,469.07. Samsung Electronics jumped 6 percent after the country’s biggest firm announced surprise stock buyback plan.

Australian markets ended modestly higher, led by miners and consumer staple stocks. The benchmark S&P/ASX 200 Index edged up by 0.2 percent to 8,300.20, while the broader All Ordinaries Index rose 0.2 percent to 8,554.40.

Uranium stocks Boss Energy and Deep Yellow surged over 7 percent each after Russia over the weekend banned enriched energy exports to the United States.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index finished 0.6 percent higher at 12,764.65 after services PMI improved in October.

Europe

European stocks have struggled for direction on Monday as investors awaited speeches from ECB Chief Christine Lagarde later in the day for interest rate guidance.

Lingering concerns over potential impacts from U.S. President-elect Donald Trump’s global economic policies have also served to keep underlying sentiment cautious.

While the U.K.’s FTSE 100 Index is just below the unchanged line, the French CAC 40 Index is down by 0.4 percent and the German DAX Index is down by 0.5 percent.

Nvidia, the world’s most valued company by market capitalization will declare its third quarter results on Wednesday, with traders watching for guidance about the company’s demand for its Blackwell AI chips.

In corporate news, Dutch technology investor Prosus has rallied and Naspers, the owner of Takealot, Media24 and more, has jumped after posting better-than-expected interim earnings.

Melrose Industries, the owner of aerospace parts maker GKN Aerospace, has also surged in London after reporting a 7 percent increase in revenue for the four-month period ended Oct. 31 and reiterating outlook for the rest of the year.

Elementis has also risen. The specialty chemicals firm announced that its chief executive officer Paul Waterman would step down following nine years at the helm.

Meanwhile, Vivendi SA shares have fallen. The French media company today announced its expectations for its audio, visual content provider Canal+, and public relations firm, Havas SA. The two units are scheduled to be listed next month.

U.S. Economic News

The National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of November at 10 am ET. The housing market index is expected to inch up to 44 in November after rising to 43 in October.

Also at 10 am ET, Chicago Federal Reserve President Austan Goolsbee is due to give welcome remarks before the Financial Markets Group Fall Conference.