Tesla Upgrade May Help U.S. Stocks Recover From Last Week’s Pullback

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to regain ground following the notably pullback seen last week.

The tech-heavy Nasdaq may receive a boost from a surge by shares of Tesla (TSLA), with the electric car maker jumping by 6.4 percent in pre-market trading after Morgan Stanley upgraded its rating on the company’s stock to Overweight from Equal-Weight.

Easing concerns about the outlook for interest rates may also contribute to strength on Wall Street, helping stocks add to the modest gains posted last Friday.

A report from the Wall Street Journal suggesting a shift in Federal Reserve officials’ stance on rates may generate some buying interest.

Fed insider Nick Timiraos said the central bank is likely to pause its recent series of rate hikes next week then take a “harder look at whether more are needed.”

While Timiraos said some Fed officials to still prefer to err on the side of raising rates too much, other see risks as more balanced and worry about unnecessarily causing a downturn or triggering financial turmoil.

Later this week, the Labor Department’s report on consumer price inflation in August could have a significant impact on the outlook for rates.

After an early move to the upside, stocks gave back ground over the course of the trading session on Friday but managed to close modestly higher. The uptick on the day came on the heels of the downward trend seen over the past few sessions.

The major averages edged higher going into the close of trading. The Dow rose 75.86 points or 0.2 percent to 34,576.59, the Nasdaq inched up 12.69 points or 0.1 percent to 13,761.53 and the S&P 500 crept up 6.35 points or 0.1 percent to 4,457.49.

Despite the uptick on the week, the major averages closed notably lower for the week. The Nasdaq tumbled by 1.9 percent, the S&P 500 slumped by 1.3 percent and the Dow slid by 0.8 percent.

The modest strength on Wall Street partly reflected bargain hunting, as some traders pick up stocks at reduced levels following recent weakness. The uptick by the Nasdaq snapped a four-day losing streak.

Some traders may also have felt concerns about the outlook for interest rates, which contributed to the recent weakness, have been overdone.

While recent economic data has led to worries the Federal Reserve may leave rates higher for longer than previously anticipated, the central bank is still widely expected to keep rates unchanged later this month.

CME Group’s FedWatch Tool is currently indicating a 93.0 percent chance the Federal Reserve will leave interest rates later this month but a 43.4 percent chance of another rate hike in November.

Overall trading activity was somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines ahead of the release of key reports this week.

Oil stocks showed a significant move to the upside on the day, benefitting a rebound by the price of crude oil following the pullback seen on Thursday.

With crude for October delivery climbing $0.64 to $87.51 a barrel, the NYSE Arca Oil Index advanced by 1.4 percent to a record closing high.

Notable strength was also visible among banking stocks, as reflected by the 1.1 percent gain posted by the KBW Bank Index.

Brokerage, utilities and software stocks also saw some strength on the day, while telecom stocks came under pressure over the course of the session.

Commodity, Currency Markets

Crude oil futures are falling $0.48 to $87.03 a barrel after climbing $0.64 to $87.51 a barrel last Friday. Meanwhile, after inching up $0.20 to $1,942.70 an ounce in the previous session, gold futures are rising $6 to $1,948.70 an ounce.

On the currency front, the U.S. dollar is trading at 146.34 yen versus the 147.83 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0724 compared to last Friday’s $1.0700.

Asia

Asian stocks ended mixed on Monday as investors braced for key U.S. and Chinese economic data due this week for directional cues.

An update on U.S. inflation may provide insight into the Federal Reserve’s future actions before it convenes next week to decide on rates. China is due to unveil data on industrial output, retail sales and house sale prices this week.

The dollar started the week under pressure, while the Japanese yen surged after comments from Bank of Japan Governor Kazuo Ueda stoked hopes that Japan could soon herald a new era away from negative rates.

Gold climbed on dollar weakness, while oil prices slipped from 10-month highs on concerns over China’s economic recovery.

Chinese shares advanced after authorities announced fresh measures to revive activity in the mainland real estate market and make it easier for insurance companies to invest in domestic stocks.

China’s consumer prices returned to positive territory in August, while factory-gate price declines slowed, data showed over the weekend, adding to signs of easing deflationary pressures.

The benchmark Shanghai Composite Index climbed 0.8 percent to 3,142.78, while Hong Kong’s Hang Seng Index dropped 0.6 percent to 18,096.45 as trading resumed after a long weekend.

Alibaba Group Holding shares tumbled 3.2 percent after the surprise departure of former CEO Daniel Zhang from the technology giant’s cloud computing business.

Japanese shares ended lower, bond yields rose, and the yen appreciated sharply against the dollar after the BOJ chief hinted there is a possibility that the central bank could soon see a shift away from negative rates.

The Nikkei 225 Index slid 0.4 percent to 32,467.76, while the broader Topix Index finished marginally higher at 2,360.48. Chip-related shares such as Advantest, Tokyo Electron and Screen Holding gave up 2-3 percent.

Banks and financials topped the gainers list, with Sumitomo Mitsui Financial and Resona Holdings surging 5-7 percent.

Seoul stocks snapped a four-day losing streak, with the Kospi closing up 0.4 percent at 2,556.88. Samsung Electronics, Celltrion, Samsung Biologics and SK Hynix rose 1-2 percent.

Game developer Netmarble soared 8.8 percent on the rising popularity of its new titles.

Australian markets eked out modest gains to snap a four-day losing streak, with banks, miners and energy stocks pacing the gainers.

The benchmark S&P ASX 200 Index rose half a percent to 7,192.30, while the broader All Ordinaries Index closed 0.4 percent higher at 7,387.80.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index fell 0.4 percent to 11,302.41.

Europe

European stocks are trading higher on Monday after the latest inflation data from China stoked optimism about easing deflationary pressures in the world’s second-largest economy.

The upside remains limited as investors brace for a slew of key U.S. and Chinese data this week as well as the European Central Bank’s rate decision due Thursday for directional cues.

The European Central Bank is expected to hike all three policy rates by 25 basis points, citing a weaker growth outlook and no clear evidence of a peak in core inflation. A few economists, however, predict it will be a close call.

While the U.K.’s FTSE 100 Index has crept up by 0.1 percent, the French CAC 40 Index and the German DAX Index are both up by 0.4 percent.

British homebuilder Vistry has soared after reiterating its full-year guidance and announcing a £55 million ($68.8 million) share buyback.

Restaurant Group has also surged. The chain of restaurants and public houses said that it has inked a deal with respect to the proposed sale of its loss-making Leisure business comprising of 75 trading sites and associated restaurants to the Big Table Group.

French lender Societe Generale has also gained after it announced a strategic partnership with Brookfield Asset Management to originate and distribute high-quality private credit investments through a private investment grade debt fund.

Hannover has also risen. The German reinsurance firm said that it expects a further price increase in the global reinsurance market, citing ongoing geopolitical issues, increasing frequency and severity of natural catastrophe losses as well as high inflation.

Covestro AG has also jumped. The maker of high-tech polymer materials has decided to enter into open-ended talks with Abu Dhabi National Oil Co. or Adnoc regarding a potential offer.

Meanwhile, AstraZeneca has dropped despite reporting encouraging initial results from the TROPION-Lung04 Phase Ib study evaluating datopotamab deruxtecan plus Imfinzi for the treatment of advanced non-small cell lung cancer.

U.S. Economic Reports

The Treasury Department is scheduled to announce the results of this month’s auction of $44 billion worth of three-year notes at 1 pm ET.

Stocks In Focus

Shares of Hostess Brands (TWNK) are surging in pre-market trading after the Twinkie maker agreed to be acquired by J.M. Smucker (SJM) in a cash and stock transaction valued at approximately $5.6 billion.

Chipmaker Qualcomm (QCOM) is also likely to see initial strength after announcing an agreement with Apple (AAPL) to supply Snapdragon 5G Modem-RF Systems for smartphone launches in 2024, 2025 and 2026.

On the other hand, U.S.-listed shares of Alibaba (BABA) may follow their Chinese-listed shares lower following the surprise departure of former CEO Daniel Zhang from the company’s cloud computing business.