Upward Momentum May Lead To Early Rebound 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 following the pullback seen in the previous session.

Stocks may look to resume the strong upward move seen last week following a brief pause in the recovery rally on Monday.

The Dow had closed higher for five consecutive sessions before Monday’s drop, while the Nasdaq had soared more than 9 percent after hitting its lowest closing level in over a year last Monday.

Wall Street may also benefit from strength in the overseas markets, which largely shrugged off Federal Reserve Chair Jerome Powell’s comments suggesting the central bank may raise interest rates more aggressively.

On the heels of Powell’s remarks, CME Group’s FedWatch Tool is currently indicating a 31.7 percent chance the Fed will raise rates by 25 basis points next month and a 68.3 percent chance of a 50 basis point rate hike.

Another quiet day on the U.S. economic front may keep some traders on the sidelines ahead of the release of reports on durable goods orders, new and pending home sales, and weekly jobless claims.

Stocks fluctuated over the course of the trading day on Monday but largely maintained a negative bias throughout the session. The major averages gave back ground following the strong upward move seen on Wall Street last week.

The major averages ended the session in negative territory but off their worst levels of the day. The Dow slid 201.94 points or 0.6 percent to 34,552.99, the Nasdaq fell 55.38 points or 0.4 percent to 13,838.46 and the S&P 500 edged down 1.94 points or less than a tenth of a percent to 4,61.18.

The lower close on Wall Street came following comments from Federal Reserve Chair Jerome Powell, who suggested the central bank might raise interest rates more aggressively if inflation remains too high.

“We will take the necessary steps to ensure a return to price stability,” Powell said in remarks to the National Association for Business Economics. “In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so.”

He added, “And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

The comments from Powell come after the Fed raised interest rates by 25 basis points last week and signaled more rate hikes are likely in the coming months.

The pullback on Wall Street also reflected profit taking, as lingering concerns about the Russia-Ukraine conflict and higher oil prices inspired some traders to cash in on last week’s gains.

Last week, the major averages had their best week since November 2020. The Nasdaq soared by 8.2 percent, while the S&P 500 and the Dow spiked by 6.2 percent and 5.5 percent, respectively.

The rally seen last week helped lift the major averages well off their recent lows, although they also remain well off their record highs.

Traders also kept an eye on the latest developments in Ukraine, with peace talks with Russia failing to make substantial progress on key issues.

Tobacco stocks turned in some of the market’s worst performances on the day, dragging the NYSE Arca Tobacco Index down by 2.7 percent.

Concerns about the outlook for interest rates also weighed on housing stocks, as reflected by the 2.5 percent slump by the Philadelphia Housing Sector Index.

Airline stocks also gave back ground following recent strength, resulting in a 1.4 percent dive by the NYSE Arca Airline Index.

Brokerage and retail stocks also saw notable weakness on the day, while energy stocks moved sharply higher along with the price of crude oil.

Commodity, Currency Markets

Crude oil futures are climbing $0.53 to $112.65 a barrel after soaring $7.42 to $112.12 a barrel on Monday. Meanwhile, after inching up $0.20 to $1,929.50 an ounce in the previous session, gold futures are slipping $0.70 to $1,928.80 an ounce.

On the currency front, the U.S. dollar is trading at 120.80 yen compared to the 119.47 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1030 compared to yesterday’s $1.1016.

Asia

Asian stocks ended broadly higher on Tuesday despite concerns over rising geopolitical tensions and hawkish comments from Federal Reserve Chair Jerome Powell.

China’s Shanghai Composite Index edged up 0.2 percent to 3,259.86 after the country’s cabinet pledged measures to boost market confidence, shore up economic stability and keep capital market development stable and healthy.

China Eastern Airlines shares plunged 6.2 percent after a Boeing 737-800 of the company with 132 people on board crashed into a hillside in southern China.

Hong Kong’s Hang Seng Index jumped 3.2 percent to close at 21,889.28 as Alibaba unveiled its record share repurchase plan. Shares of the e-commerce giant surged 10.4 percent.

Investors shrugged off data showing that Hong Kong’s consumer price inflation rose 1.6 percent year-on-year in February following a 1.2 percent increase in January.

Japanese shares ended sharply higher as markets reopened after a holiday. The Nikkei 225 Index jumped 1.5 percent to finish at 27,224.11, extending gains for a sixth straight session amid optimism that a weakening yen could bolster exporters’ outlook.

Oil explorers, banks and financials topped the gainers list, while soy sauce maker Kikkoman tumbled 6.7 percent. The U. S. dollar surged to six-year highs against the yen, hitting 120 yen-levels.

Seoul stocks ended notably higher on institutional buying. The Kospi climbed 0.9 percent to close at 2,710. Tech, auto and heavy industry stocks led the advance. Daewoo Shipbuilding & Marine Engineering Co. shares soared 5.4 percent.

Australian markets hit a two-month high as higher commodity prices amid fears of energy sanctions on Russia helped lift miners and energy stocks. The benchmark S&P/ASX 200 rose 0.9 percent to settle at 7,341.10, its highest close since January 20.

Coal miner New Hope Corp jumped 8.5 percent after posting strong half-year results due to the surge in thermal coal prices.

Boral tumbled 3.5 percent after the building materials maker said its earnings have been knocked down by lower sales volumes, hit by recent rainfall in New South Wales and Queensland.

Europe

European stocks have advanced on Tuesday after reports emerged that Ukrainian President Volodymyr Zelensky was prepared to discuss a commitment from Ukraine not to seek NATO membership in exchange for a ceasefire, the withdrawal of Russian troops and a guarantee of Ukraine’s security.

Investors also appeared to take in stride Federal Reserve Chair Jerome Powell’s comments Monday that the U.S. central bank was prepared to raise rates aggressively, if needed.

U.S. Treasury yields have risen to their highest level since 2019 and Euro zone government bond yields followed suit after Powell’s hawkish comments.

While the German DAX Index has risen by 0.6 percent, the French CAC 40 Index is up by 0.5 percent and the U.K.’s FTSE 100 Index is up by 0.4 percent.

Banks have climbed on expectations that they would benefit from higher interest rates. Commerzbank, Deutsche Bank, Barclays, BNP Paribas and HSBC Holdings are posting notable gains.

Softcat, a provider of IT infrastructure products and services, has also soared after reporting solid half-year results and raising its full-year guidance.

Finnish utility Fortum has also moved to the upside after it agreed to sell its 50 percent stake in Fortum Oslo Varme for 10 billion Norwegian crowns ($1.14 billion).

Europe’s largest online restaurant food ordering service Just Eat Takeaway.com has also jumped. The company has secured a long-term global strategic partnership with McDonald’s Corp. that will lead to increased operational benefits.

Meanwhile, British home improvement retailer Kingfisher has dropped despite the company reporting a significant rise in pretax profit and revenue for fiscal 2022.

U.S. Economic Reports

New York Federal Reserve President John Williams is due to participate in a virtual Conversation with the Governors panel before the BIS Innovation Summit 2022 organized by the Bank for International Settlements at 10:30 am ET.

Stocks In Focus

Shares of Alibaba (BABA) are moving sharply higher in pre-market trading after the Chinese e-commerce giant increased its share buyback program to a record $25 billion.

Athletic apparel and footwear giant Nike (NKE) is also seeing significant pre-market strength after reporting fiscal third quarter results that beat analyst estimates on both the top and bottom lines.

Shares of Tencent Music (TME) may also move to the upside after the entertainment services company reported better than expected fiscal fourth quarter earnings and said it is pursuing a secondary listing on the Hong Kong Stock Exchange.

Meanwhile, shares of Okta (OKTA) are likely to come under pressure after the authentication services provider said it is investigating reports of a digital breach.

Artificial intelligence lending platform operator Upstart Holdings (UPST) may also move to the downside after Wedbush downgraded its rating on the company’s stock to Underperform from Neutral.