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 see initial strength following the lackluster performance seen during last Friday’s session.

Stocks may benefit from optimism about the outlook for interest rates ahead of the Federal Reserve’s monetary policy decision on Wednesday.

The Fed is widely expected to continue cutting interest rates, with CME Group’s FedWatch Tool currently indicating a 97.1 percent chance the central bank will lower rates by another 25 basis points.

Traders are likely to pay close attention to the Fed’s accompanying statement as well as officials’ latest economic projections, including their forecasts for rates.

Recent data showing inflation remains sticky has led to some worries the Fed will lower rates slower than previously anticipated next year.

In U.S. economic news, the Federal Reserve Bank of New York released a report showing a sharp pullback by its reading on regional manufacturing activity in the month of December.

After failing to sustain an early move to the upside, stocks showed a lack of direction over the course of the trading session on Friday. The major averages bounced back and forth across the unchanged line before eventually closing narrowly mixed.

The Dow dipped 86.06 points or 0.2 percent to 43,828.06, closing lower for the seventh consecutive session. The S&P 500 edged down 0.16 points or less than a tenth of a percent to 6,051.09, while the tech-heavy Nasdaq inched up 23.88 points or 0.1 percent to 19,926.72.

The major averages also turned in a mixed performance for the week. While the Nasdaq rose by 0.3 percent, the S&P 500 slid by 0.6 percent and the narrower Dow tumbled by 1.8 percent.

The early strength on Wall Street partly reflected a positive reaction to earnings news from Broadcom (AVGO), with the chipmaker soaring by 24.4 percent on the day.

The spike by Broadcom came after the company reported better than expected fiscal fourth quarter earnings and said it expects continued strong demand for its custom AI chips.

Buying interest waned shortly after the start of trading, however, as traders looked ahead to the Federal Reserve meeting.

On the economic front, the Labor Department released a report showing import prices in the U.S. unexpectedly edged higher in the month of November.

Gold stocks extended the sell-off seen in the previous session amid a continued slump by the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 2.7 percent.

Considerable weakness was also visible among steel stocks, with the NYSE Arca Steel Index tumbling by 2.6 percent to its lowest closing level in almost three months.

Computer hardware, airline and housing stocks also saw notable weakness, while semiconductor and networking stocks showed strong moves to the upside.

Commodity, Currency Markets

Crude oil futures are falling $0.65 to $70.64 a barrel after jumping $1.27 to $71.29 a barrel last Friday. Meanwhile, after plunging $33.60 to $2,675.80 an ounce in the previous session, gold futures are inching up $3.80 to $2,679.60 an ounce.

On the currency front, the U.S. dollar is trading at 154.03 yen versus the 153.65 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0498 compared to last Friday’s $1.0501.

Asia

Asian stocks ended mixed on Monday as China reported mixed economic data and focus shifted to the Bank of Japan and Federal Reserve interest rate decisions due this week.

The dollar hovered close to a three-week peak versus major peers and the Japanese yen struggled to recover following its worst week since September after reports emerged that the Bank of Japan is leaning towards keeping rates steady this week. Gold ticked higher in Asian trading, while oil prices dipped on Chinese demand concerns.

China’s Shanghai Composite Index dipped 0.2 percent to 3,386.33 as traders weighed mixed readings against a vow from the nation’s regulators to stabilize markets.

Hong Kong’s Hang Seng Index fell 0.9 percent to 19,795.49 despite reports that China might cut interest rates and the reserve requirement ratio in a timely manner next year.

China’s official data released today painted a mixed picture for growth in November. Industrial production posted a faster expansion and house prices fell at slower pace, while retail sales growth softened, highlighting the need for additional stimulus to retain sustainable growth.

Japanese markets ended a choppy session lower amid caution before the Bank of Japan’s two-day policy meeting starting Wednesday.

The Nikkei 225 Index finished marginally lower at 39,457.49, while the broader Topix Index closed 0.3 percent lower at 2,738.33.

Seoul stocks ended slightly lower after President Yoon Suk Yeol was impeached over the weekend. The Kospi settled 0.2 percent lower at 2,488.97, giving up early gains due to profit taking after four days of gains.

Samsung Electronics, Hyundai Motor and Kia Corp. dropped 1-3 percent, while SK Hynix jumped 2.2 percent.

Australian stocks ended lower, dragged down by technology and mining stocks. The benchmark S&P/ASX 200 Index shed 0.6 percent to close at 8,249.50, while the broader All Ordinaries Index fell 0.7 percent to 8,494.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index edged up by 0.3 percent to 12,797.33.

Europe

European stocks have moved mostly lower on Monday after credit ratings agency Moody’s unexpectedly downgraded France’s rating, adding to pressure on the nation’s borrowing costs and raising doubts over whether a new government can mend the deteriorating financial situation.

There was some cheer on the data front as a survey showed the decline in eurozone business activity eased this month.

HCOB’s preliminary composite eurozone Purchasing Managers’ Index, compiled by S&P Global, rose to 49.5 in December from November’s 48.3.

Eurozone government bond yields held steady after European Central Bank President Christine Lagarde said the darkest days of high inflation are behind and the central bank will continue to lower its key interest rate.

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

In corporate news, healthcare company Novo Nordisk A/S has jumped after an announcement that it plans to invest 8.5 billion Danish kroner to establish a completely new production facility in Odense, Denmark.

Swiss biopharma Basilea Pharmaceutica has also surged after it entered into an exclusive distribution and license agreement with Innoviva Specialty Therapeutics for the commercialization of Basilea’s hospital anti-MRSA antibiotic Zevtera or ceftobiprole in the United States.

Mass-media conglomerate Vivendi has also soared in Paris as its newly spun-off entities Canal+, Havas and Louis Hachette Group started trading in London, Amsterdam and Paris respectively.

Meanwhile, Porsche Automobil Holding SE has slumped. The company withdrew its profit guidance for 2024, citing potential non-cash impairment charges related to its investment in Volkswagen AG and Porsche AG.

Gambling outfit Entain that owns Ladbrokes has also plunged in London after Australia’s anti-money laundering regulator had opened civil penalty proceedings related to alleged breaches of the country’s contraventions anti-money laundering and counter-terrorism law.

U.S. Economic News

After reporting a sharp increase by its reading on regional manufacturing activity in the previous month, the Federal Reserve Bank of New York released a report on Monday showing a sharp pullback by the index in the month of December.

The New York Fed said its general business conditions index plummeted to 0.2 in December after spiking to 31.2 in November, although a positive reading still indicates growth. Economists had expected the index to tumble to 12.0.

Looking ahead, the New York Fed said firms remained fairly optimistic conditions would continue to improve in the months ahead, but the index for future business activity slid to 24.6 in December from 33.2 in November.