Persistent Economic Optimism May Lead To Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to move back to the upside after turning lower over the course of the previous session.

Concerns about slowing economic growth contributed to the downturn on Monday, although traders remain generally optimistic about the outlook for the U.S. economy.

The Federal Reserve’s repeated promises that it will not begin scaling back stimulus until “substantial further progress” has been made toward its policy goals has also helped prop up the markets.

Last week, Fed Chair Jerome Powell said the central bank is a “ways away” from altering policy, noting there is still “some ground to cover on the labor market side.”

Positive sentiment may also be generated in reaction to data published by the Centers for Disease Control and Prevention showing 70 percent of U.S. adults have received at least one dose of a coronavirus vaccine.

The increase in vaccinations comes amid the rapid spread of the delta variant of the coronavirus, which has led to renewed lockdowns in some parts of the world.

CDC recently revised its guidance to recommend that people vaccinated for the coronavirus resume wearing masks indoors in areas of substantial or high transmission, particularly the South and West.

Stocks moved to the upside early in the trading day on Monday but gave back ground over the course of the session. The major averages pulled back well off their early highs, with the Dow and the S&P 500 ending the day in negative territory.

After reaching a record intraday high in early trading, the Dow fell 97.31 points or 0.3 percent to 34,838.16. The S&P 500 also dipped 8.10 points or 0.2 percent to 4,387.16, while the Nasdaq inched up 8.39 points or 0.1 percent to 14,681.07.

The early strength on Wall Street partly reflected recent upward momentum, which has helped lift stocks to new record highs despite concerns about the spread of the delta variant of the coronavirus.

Traders remain optimistic about the outlook for the economy amid indications the Federal Reserve is not in a hurry to begin scaling back stimulus.

Positive sentiment may also have been generated after a bipartisan group of Senators unveiled a nearly $1 trillion infrastructure package.

Senate Majority Leader Chuck Schumer, D-N.Y., said he believes the Senate will vote to approve the massive bill in a matter of days.

However, buying interest waned over the course of the session after a report from the Institute for Supply Management showed an unexpected slowdown in the pace of growth in U.S. manufacturing activity in the month of July.

The ISM said its manufacturing PMI dipped to 59.5 in July from 60.6 in June. While a reading above 50 still indicates growth in the manufacturing sector, economists had expected the index to inch up to 60.9.

A separate report from the Commerce Department showed construction spending crept up by less than expected in the month of June.

Later this week, trading may be impacted by reaction to the Labor Department’s closely watched report on the employment situation in the month of July.

Economists currently expect employment to spike by about 900,000 jobs in July after surging by 850,000 jobs in June. The unemployment rate is expected to dip to 5.7 percent from 5.9 percent.

Chemical stocks showed a significant downturn over the course of the session, with the S&P Chemical Sector Index falling by 1.1 percent after reaching its best intraday level in well over a month.

Notable weakness also emerged among telecom stocks, as reflected by the 1 percent drop by the NYSE Arca North American Telecom Index. The index ended the day at a more than two-month closing low.

Airline, oil service and natural gas stocks also moved to the downside on the day, while some strength remained visible among utilities stocks.

Commodity, Currency Markets

Crude oil futures are slumping $1.18 to $70.08 a barrel after plunging $2.69 to $71.26 a barrel on Monday. Meanwhile, after rising $5 to $1,822.20 an ounce in the previous session, gold futures are sliding $12.20 to $1,810.60 an ounce.

On the currency front, the U.S. dollar is trading at 109.09 yen compared to the 109.31 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1882 compared to yesterday’s $1.1870.

Asia

Asian stocks ended mostly lower on Tuesday amid lingering concerns over the spread of the Delta coronavirus variant and China’s regulatory crackdown on technology companies in dramatic ways.

South Korea is struggling to contain a fourth Covid-19 wave, with new cases staying in the 1,200s for the second day in a row.

In China, the spread of the Delta variant from the mainland’s coast to inland cities prompted authorities to implement strict measures.

China’s Shanghai Composite Index fell 16.29 points, or 0.5 percent, to 3,447.99. Online gaming stocks tumbled after state media branded online gaming “opium” and likened it to a drug.

Hong Kong’s Hang Seng Index ended down 40.98 points, or 0.2 percent, at 26,194.82. Tencent shares slumped 6.1 percent as an article by Economic Information Daily called for further restrictions on the industry in order to prevent addiction and other negative impacts on children.

Japanese shares fell after Prime Minister Yoshihide Suga flagged growing COVID-19 infections among Japanese in their 20s and 30s. The Nikkei 225 Index slid 139.19 points, or 0.5 percent, to close at 27,641.83 as the country grappled with its own fifth wave, centered on Tokyo. The broader Topix ended down 8.91 points, or 0.5 percent, at 1,931.14.

Video game company Nexon plunged 6.5 percent as Chinese state media branded online gaming “spiritual opium” in Beijing’s latest assault on tech and social habits.

Nintendo dropped 1.1 percent, Bandai Namco Holdings declined 1.5 percent, Konami Holdings gave up 2.3 percent and DeNA lost 3.9 percent.

Airline stocks fell, with ANA Holdings and Japan Airlines losing 2-3 percent. M&A adviser GCA soared 28.5 percent after U.S. boutique investment bank Houlihan Lokey launched a tender offer to acquire the company.

In economic news, consumer prices in the Tokyo region were down 0.1 percent year-on-year in July, official data showed. That was in line with expectations after a flat reading in June.

Australian markets ended lower as the Reserve Bank stuck with its plan to taper its bond-buying program despite Sydney’s prolonged lockdown.

The benchmark S&P/ASX 200 Index edged down 16.90 points, or 0.2 percent, to 7,474.50, retreating from the previous session’s record close. The broader All Ordinaries Index dipped 10 points, or 0.1 percent, to 7,750.50.

Weak metals prices weighed on the mining sector, with BHP and Fortescue Metals Group declining 1.4 percent and 1.6 percent, respectively. Oil Search, Woodside Petroleum and Santos fell over 1 percent as oil extend overnight losses on fuel demand concerns.

Buy now, pay later firm Afterpay soared 11.4 percent to extend gains from the previous session after agreeing to a 31 percent premium takeover bid from Square Inc. Appen surged 5.4 percent and Wisetech Global advanced 1.3 percent.

Meanwhile, Seoul stocks rose for the second straight day, with tech heavyweights leading the surge on expectations for robust global demand. The benchmark Kospi ended a choppy session up 14.10 points, or 0.4 percent, at 3,237.14. Samsung Electronics climbed 2.7 percent and SK Hynix added 3.5 percent.

Data released earlier in the day showed the country’s consumer price inflation accelerated in July, staying at a nine-year peak marked in May.

Europe

European stocks are hovering near record highs on Tuesday as a set of upbeat earnings results helped offset concerns about spiking COVID-19 cases in Asia and Chinese regulation uncertainties.

The pan-European Stoxx 600 Index is currently up by 0.2 percent. The French CAC 40 Index has also advanced by 0.8 percent, while the U.K.’s FTSE 100 Index is up by 0.2 percent but the German DAX Index is down by 0.1 percent.

BP Plc shares have soared. The oil and gas giant expanded its dividend and share buyback program after delivering better than expected second quarter earnings.

Standard Chartered has also rallied. The lender resumed interim dividend payout and announced a $250 million share buyback after posting a better than expected 57 percent jump in its first-half pretax profit.

Keller Group shares havealso jumped. The geotechnical specialist contractor reported a better than expected first half profit and said its performance for fiscal 2021 will be materially ahead of the board’s previous expectations.

Moto insurer Direct Line Insurance has also advanced after reporting an increase in first-half profit and raising its dividend.

Carmaker Stellantis NV, created by merger of Fiat Chrysler and Peugeot maker PSA, has also surged after raising its full-year profitability outlook substantially.

Societe Generale has also moved sharply higher after the French lender swung back to profit in the second quarter and raised its forecast for the full year.

Frederic Oudea, the group’s CEO, said in a statement that the results for the first half of 2021 are the best in five years.

Krones has also advanced. The leading manufacturer of filling and packaging technology said its markets have so far recovered faster than expected from the pandemic-related downturn.

Meanwhile, Dutch firm Prosus, which has a stake in Chinese tech giant Tencent, has slumped after Chinese state media branded online gaming “spiritual opium” in Beijing’s latest assault on tech and social habits.

German chipmaker Infineon Technologies has also moved notably lower after saying it was battling extreme tightness in its markets.

BMW has also tumbled. The luxury carmaker warned the second half of the year would likely be affected by the global semiconductor shortage and rising raw materials prices.

Software firm TeamViewer has also moved to the downside. After reporting a drop in first-half profit, the company lowered its Ebitda-margin guidance for 2021.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of June at 10 am ET. Factory orders are expected to increase by 1.0 percent in June after jumping by 1.7 percent in May.

At 2 pm ET, Federal Reserve Governor Michelle Bowman is due to give welcome remarks before a virtual research seminar sponsored by the Board of Governors of the Federal Reserve System.

Stocks In Focus

Shares of Translate Bio (TBIO) are skyrocketing in pre-market trading after the biotechnology company agreed to be acquired by French drugmaker Sanofi (SNY) for $3.2 billion or $38 per share in cash.

Athletic apparel maker Under Armour (UAA) is also seeing significant pre-market strength after reporting better than expected second quarter results and raising its full-year guidance.

On the other hand, shares of Clorox (CLX) are likely to come under pressure after the consumer products company reported fiscal fourth quarter results that missed analyst estimates.

Video game publisher Take-Two (TTWO) may also move to the downside after reporting better than expected fiscal first quarter results but providing disappointing guidance.