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 extend the upward move seen last Friday.

Upbeat Chinese economic data may contribute to initial strength on Wall Street, as the markets continue to recover from the pullback seen in the middle of last week.

Buying interest may be somewhat subdued, however, with concerns about inflation continuing to weigh on investors’ minds.

In U.S. economic news, the New York Federal Reserve released a report showing New York manufacturing activity grew strongly in the month of November.

Following the mixed performance seen on Thursday, the major U.S. stock indexes all moved to the upside during trading on Friday. The Nasdaq and the S&P 500 extended the rebound seen on Thursday, while the Dow moved higher for the first time in four sessions.

The major averages pulled back off their highs going into the close but remained firmly positive. The Dow rose 179.08 points or 0.5 percent to 36,100.31, the Nasdaq jumped 156.68 points or 1 percent to 15,860.96 and the S&P 500 climbed 33.58 points or 0.7 percent to 4,682.85.

Despite the advance on the day, the major averages all moved lower for the week. The S&P 500 dipped by 0.3 percent, while the Dow and the Nasdaq slid by 0.6 percent and 0.7 percent, respectively.

The strength on Wall Street came as the concerns about inflation raised by the Labor Department’s consumer price report seem to have been short-lived.

While the report showed consumer prices rose at their fastest annual rate in over thirty years in October, analysts have suggested the current wave of price spikes due to chronic worldwide supply constraints will not last long.

Federal Reserve officials have also repeatedly described the factors driving inflation as “transitory,” indicating the central bank is not currently considering accelerating monetary policy tightening.

After ending Thursday’s trading lower amid a steep drop by Disney (DIS), the Dow benefitted from an advance by shares of Johnson & Johnson (JNJ).

J&J rose by 1.2 percent after the healthcare giant announced plans to separate its consumer health business from its pharmaceutical and medical device operations.

Meanwhile, traders largely shrugged off report from the University of Michigan showing an unexpected deterioration in U.S. consumer sentiment in the month of November.

The preliminary report said the consumer sentiment index slid to 66.8 in November from a final reading of 71.7 in October. The decrease surprised economists, who had expected the index to inch up to 72.4.

With the unexpected drop, the consumer sentiment index fell to its lowest level since hitting 63.7 in November of 2011.

Surveys of Consumers chief economist Richard Curtin said the deterioration in consumer sentiment was due to “an escalating inflation rate and the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation.”

Tobacco stocks showed a substantial move to the upside on the day, driving the NYSE Arca Tobacco Index up by 2.4 percent.

Significant strength was also visible among housing stocks, as reflected by the 1.5 percent gain posted by the Philadelphia Housing Sector Index.

Software stocks also turned in a strong performance, resulting in a 1.5 percent advance by the Dow Jones U.S. Software Index.

Retail and networking stocks also saw considerable strength, while oil service stocks moved lower along with the price of crude oil.

Commodity, Currency Markets

Crude oil futures are falling $0.58 to $80.21 a barrel after sliding $0.80 to $80.79 a barrel last Friday. Meanwhile, after rising $4.60 to $1,868.50 an ounce in the previous session, gold futures are edging down $0.10 to $1,868.40 an ounce.

On the currency front, the U.S. dollar is trading at 113.86 yen versus the 113.89 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1439 compared to last Friday’s $1.1445.

Asia

Asian stocks ended broadly higher on Monday as a slew of strong economic data from China helped offset investor concerns about inflation.

Investors awaited speeches by a number of Federal Reserve officials this week for additional clues on interest rates and monetary policy going forward.

Chinese shares ended slightly lower as investors waited for the virtual summit of the leaders of the U.S. and China set for this week. U.S. President Joe Biden and his Chinese counterpart Xi Jinping will exchange views on bilateral and international issues during the virtual meeting.

The benchmark Shanghai Composite Index slipped 5.80 points, or 0.2 percent, to settle at 3,533.30, while Hong Kong’s Hang Seng Index ended up 62.94 points, or 0.3 percent, at 25,390.91.

Industrial production in China was up 3.5 percent year-on-year in October, the National Bureau of Statistics said, exceeding estimates for 3.0 percent and up from 3.1 percent in September.

The bureau also said that retail sales jumped an annual 4.9 percent – again beating expectations for 3.5 percent and up from 4.4 percent in the previous month.

Fixed asset investment increased an annual 6.1 percent and the jobless rate came in unchanged at 4.9 percent last month, while the house price index was up 3.4 percent, slowing from 3.8 percent in the previous month.

Japanese shares advanced as data showed the country’s economy contracted much faster than expected in the third quarter, ramping up expectations for Prime Minister Fumio Kishida’s stimulus package.

The Nikkei 225 Index climbed 166.83 points, or 0.6 percent, to 29,776.80, while the broader Topix closed 0.4 percent higher at 2,048.52.

Technology investor SoftBank Group climbed 2.2 percent and medical services platform M3 rallied 3.3 percent. Restaurant chain Skylark Holdings soared 6.5 percent after raising its annual net profit forecast.

Australian markets rose as Chinese economic data surprised on the high side. The benchmark S&P/ASX 200 Index inched up 27.10 points, or 0.4 percent, to 7,470.10, while the broader All Ordinaries Index ended up 32.40 points, or 0.4 percent, at 7,798.20.

Healthcare and tech stocks topped the gainers list, while banks declined amid fears about high inflation and interest rate increases. Drug developer Mesoblast surged 11.8 percent after announcing a positive phase three trial result of its stroke medicine.

Seoul stocks rallied amid foreign and institutional buying. The Kospi jumped 30.72 points, or 1 percent, to close just shy of the 3,000-point mark as investors scrutinized better than expected data from China.

Market heavyweight Samsung Electronics rose 1.1 percent, No. 2 chipmaker SK Hynix soared 4.2 percent and pharmaceutical giant Samsung Biologics added 3.7 percent.

Europe

European stocks have edged higher on Monday after a slew of strong economic data from China helped offset investor concerns around high inflation and interest rate increases. The upside remains capped as COVID-19 worries return to haunt the markets.

Austria has finally ruled in favor of a mandatory nationwide lockdown for all those unvaccinated against COVID-19, effective today, amid record-level infection rates.

Elsewhere, Germany’s coronavirus infection rate has risen to its highest level since the start of the pandemic, public health figures showed.

While the U.K.’s FTSE 100 Index has bucked the uptrend and edged down by 0.1 percent, the German DAX Index is up by 0.3 percent and the French CAC 40 Index is up by 0.6 percent.

Royal Dutch Shell has rallied after the oil major announced a proposal to simplify its share structure to increase the speed and flexibility of capital and portfolio actions.

Cineworld, the world’s second-largest cinema chain, has also moved sharply higher after reporting an improvement in October box office revenue.

Plane maker Airbus has also jumped in Paris after it notched a mega-order for 255 narrow-body jets at the Dubai Airshow.

Meanwhile, Philips has plunged. The medical equipment maker, which is recalling ventilators due to use of parts containing a potentially hazardous foam, announced it was in discussions with U.S. regulators following a new inspection of one of its facilities.

Spanish lender BBVA has also tumbled as it launched a €2.25bn bid that will give it full ownership of Turkish lender Garanti.

Miners have also taken a hit after U.N. climate talks ended Saturday with a deal to phase-out fossil fuel subsidies and reduce coal use.

Also, data showed crude steel output in China, the world’s top producer of the metal, fell for the fifth straight month in October amid curbs.

BT Group has given up early gains to trade on a flat note after reports telecom tycoon Patrick Drahi is looking to increase his stake in the British company.

U.S. Economic Reports

New York manufacturing activity grew strongly in the month of November, according to a report released by the Federal Reserve Bank of New York on Monday.

The New York Fed said its general business conditions index jumped to 30.9 in November from 19.8 in October, with a positive reading indicating growth. Economists had expected the index to rise to 21.6.

Meanwhile, the report said firms were less optimistic about the six-month outlook than they were last month, with the index for future business conditions tumbling to 36.9 in November from 52.0 in October.

Stocks In Focus

Shares of Dollar Tree (DLTR) are seeing significant pre-market strength after a report from the Wall Street Journal said activist investor Mantle Ridge LP has at least a $1.8 billion stake in the discount retailer.

Data center focused REIT CoreSite Realty (COR) may also move to the upside after agreeing to be acquired by American Tower (AMT) for $170 per share in cash.

On the other hand, shares of Oatly Group (OTLY) may come under pressure after the plant-based dairy company reported weaker than expected third quarter revenues and issued a revenue warning for the year.

Cybersecurity company CrowdStrike (CRWD) may also move to the downside after Morgan Stanley initiated coverage of the company’s stock with an Underweight rating.