Futures Pointing 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 after ending last Friday’s trading sharply higher.

After seeing substantial volatility early in the session, stocks moved sharply higher over the course of the trading day on Friday. With the rally, the major averages regained ground following the steep drop seen in the previous session.

The major averages pulled back off their highs going into the close but remained firmly positive. The Dow surged 482.54 points or 1.4 percent to 34,326.46, the Nasdaq advanced 118.12 points or 0.8 percent to 14,566.70 and the S&P 500 jumped 49.50 points or 1.2 percent to 4,357.04.

Despite the rebound on the day, the major averages posted significant losses for the week. The Dow slid by 1.4 percent, the S&P 500 slumped by 2.2 percent and the Nasdaq plunged by 3.2 percent.

The sharply higher close on Wall Street came as traders’ desire to go bargain hunting seemed to win out over concerns about inflation and the Federal Reserve scaling back its asset purchases.

The major averages showed wild swings in morning trading but eventually sustained a move to upside as traders picked up stocks at reduced levels following a disappointing September.

The Dow ended Thursday’s trading at its lowest closing level in three months, while the Nasdaq and the S&P 500 fell to two-month closing lows.

For the month of September, the Dow tumbled by 4.3 percent, and the Nasdaq and the S&P 500 plummeted by 5.3 percent and 4.8 percent, respectively. The S&P 500 saw its worst month since the early days of the coronavirus pandemic.

An extended pullback by treasury yields may also have generated buying interest on Wall Street, with the ten-year yield continuing to give back ground after reaching a three-month closing high on Wednesday.

On the U.S. economic front, a report from the Institute for Supply Management showed an unexpected acceleration in the pace of growth in U.S. manufacturing activity but noted persistent supply chain issues.

The ISM said is manufacturing PMI crept up to 61.1 in September from 59.9 in August, with a reading above 50 indicating growth in the manufacturing sector. The uptick surprised economists, who had expected the index to edge down to 59.6.

“Manufacturing performed well for the 16th straight month, with demand, consumption and inputs registering month-over-month growth, in spite of continuing unprecedented obstacles and ever-increasing demand,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

He added, “Panelists’ companies and their supply chains continue to struggle to meet demand due to difficulties in hiring and a clear cycle of labor turnover, as workers opt for more attractive job opportunities.”

Airline stocks showed a substantial move to the upside on the day, with the NYSE Arca Airline Index soaring by 5.8 percent to its best closing level in over three months.

Southwest Airlines (LUV) posted a strong gain after JPMorgan upgraded its rating on the company’s stock to Overweight from Neutral.

Significant strength was also visible among energy stocks, which moved higher along with the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index surged up by 3.4 percent and the NYSE Arca Oil Index jumped by 2.7 percent.

Financial, chemical, and software stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are rising $0.12 to $76 barrel after climbing $0.85 to $75.88 a barrel last Friday. Meanwhile, after inching up $1.40 to $1,758.40 an ounce in the previous session, gold futures are slipping $6 to $1,752.40 an ounce.

On the currency front, the U.S. dollar is trading at 110.95 yen versus the 111.05 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1635 compared to last Friday’s $1.1596.

Asia

Asian stocks ended mixed in thin holiday trading on Monday, as the fate of the Biden Administration’s flagship spending bills remained unclear and the Evergrande debt crisis continued to cast doubt over China’s economic growth.

Chinese markets were closed for the National Day holiday and South Korea for National Foundation Day.

Hong Kong’s Hang Seng Index tumbled 539.27 points, or 2.2 percent, to 24,036.37 after trading in the shares of troubled property giant China Evergrande was suspended, sparking speculation about a possible asset divestment at the cash-strapped company.

Chinese developer Hopson also suspended trading of its shares, citing an impending announcement of a “major transaction”.

Japanese shares fell sharply as the nation’s new premier called for a sooner-than-expected election. The Nikkei 225 Index fell 326.18 points, or 1.1 percent, to 28,444.89, extending losses for a sixth consecutive session. The broader Topix closed 0.6 percent lower at 1,973.92.

Shippers Kawasaki Kisen and Nippon Yusen both lost about 8 percent, while chip-making equipment maker Tokyo Electron tumbled 3.6 percent, technology start-up investor SoftBank gave up 2.5 percent and robot maker Fanuc lost 4.3 percent.

Department store operator J Front Retailing rallied 5.3 percent and Isetan Mitsukoshi Holdings both jumped over 5 percent after Japan lifted its COVID-19 emergency measures.

Australian markets advanced, led by financials and energy stocks. The benchmark S&P/ASX 200 Index climbed 93 points, or 1.3 percent, to 7,278.50, while the broader All Ordinaries Index ended up 90.20 points, or 1.2 percent, at 7,576.80.

Commonwealth Bank of Australia shares soared 5 percent after the lender announced a successful completion of its A$6 billion ($4.37 billion) off-market share buy-back of ordinary shares. The other three big banks rose about 2 percent each.

Woodside Petroleum and Santos gained around 2 percent each after oil prices settled near three-year highs last week on expectations OPEC ministers will maintain a steady pace in raising supply. Origin Energy jumped 3.4 percent.

Gold stocks also posted broad-based gains as gold prices held steady below a one-week high in Asian trading.

Europe

European stocks are mixed on Monday as investors fret over risk to growth from rising inflation and China Evergrande’s financial troubles.

Market participants were closely watching beleaguered developer China Evergrande, whose shares were suspended in Hong Kong ahead of an announcement about a major transaction.

Eurozone finance ministers will meet in Luxembourg later today, with matters including the EU’s recovery plans as well as progress on the much-delayed banking union project on the agenda.

While the U.K.’s FTSE 100 Index is up by 0.1 percent, the French CAC 40 Index is just below the unchanged line and the German DAX Index is down by 0.1 percent.

Banks, automakers and luxury stocks are broadly lower on concerns that regulatory clampdowns and a collapse at Evergrande could hurt an already fragile Chinese economy and drag on global growth.

Spanish energy company Repsol has also risen on expectations that it will benefit from record high gas prices.

Morrisons has tumbled in London after private equity firm Clayton, Dubilier & Rice (CD&R) won a bid for the supermarket chain in an auction at the weekend.

Petrofac has fallen in volatile trading after the oil services group said it is looking at refinancing options including debt and fresh equity.

AstraZeneca has climbed. The drug maker announced that its cancer drug Enhertu has been granted Breakthrough Therapy Designation by the FDA for the treatment of adult patients with unresectable or metastatic HER2 positive breast cancer.

FirstGroup has declined. The provider of transport services in the U.K. and North America announced that its unit First South West Limited has acquired the remaining 50 percent shareholding in its Somerset Passenger Solutions joint venture.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of August at 10 am ET. Factory orders are expected to increase by 0.9 percent.

Also at 10 am ET, St. Louis Federal Reserve President James Bullard is due to give remarks and participate in a “Mastering the Economic Revival” panel via videoconference before the World Strategic Forum International Economic Forum of the Americas.

Boston Federal Reserve President Eric Rosengren is also scheduled to give welcoming remarks before a virtual “Racial Disparities in Today’s Economy” conference at 10 am ET.