Futures Pointing To Extended Rebound On Wall Street

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to add to the strong gains posted in the previous session.

Traders may continue to pick up stocks at somewhat reduced levels, as the major averages remain well off their recent highs even after yesterday’s rally.

Optimism about the outlook for interest rates may also generate continued buying interest ahead of the Federal Reserve’s monetary policy meeting next week.

The Fed is almost universally expected to begin lowering interest rates but there is some debate about the size of the rate cut.

CME Group’s FedWatch Tool is currently indicating a 73 percent chance the Fed will lower rates by 25 basis points and a 27 percent chance of a 50 basis point rate cut.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of closely watched inflation data in the coming days.

The Labor Department is scheduled to release reports on consumer and producer price inflation in the month of August on Wednesday and Thursday, respectively.

The reports are expected to show slowdowns by the rates of consumer and producer price growth compared to the same month a year ago.

Following the sell-off seen in the previous week, stocks showed a strong move back to the upside during trading on Monday. The major averages all moved sharply higher over the course of the session.

The major averages pulled back off their highs of the session in afternoon trading but remained firmly positive. The Dow surged 484.18 points or 1.2 percent to 40,829.59, the Nasdaq jumped 193.77 points or 1.2 percent to 16,884.60 and the S&P 500 shot up 62.63 points or 1.2 percent to 5,471.05.

The rally on Wall Street came as traders looked to pick up stocks at somewhat reduced levels following the steep drop seen last week, which dragged the Nasdaq down to its lowest levels in nearly a month.

Optimism the Fed will lower interest rates later this month also contributed to the strength on Wall Street despite lingering concerns about the outlook for the U.S. economy.

Airline stocks saw substantial strength on the day, with the NYSE Arca Airline Index soaring by 2.3 percent to its best closing level in over a month.

JetBlue (JBLU) helped lead the sector higher, spiking by 7.2 percent after Bank of America upgraded its rating on the airline’s stock to Neutral from Underperform.

Significant strength was also visible among semiconductor stocks, as reflected by the 2.2 percent jump by the Philadelphia Semiconductor Index. The index rebounded after ending last Friday’s trading at a one-month closing low.

Networking, banking and computer hardware stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are sliding $0.78 to $67.93 a barrel after jumping $1.04 to $68.71 a barrel on Monday. Meanwhile, after climbing $8.10 to $2,532.70 an ounce in the previous session, gold futures are inching up $3.30 to $2,536 an ounce.

On the currency front, the U.S. dollar is trading at 142.84 yen compared to the 143.18 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1032 compared to yesterday’s $1.1035.

Asia

Asian stocks ended Tuesday’s session on a mixed note after the U.S. government proposed new sanctions on Chinese biotech firms.

Investors digested Chinese trade data and looked ahead to the release of key U.S. consumer and producer inflation readings this week for additional clues on the size of a potential rate cut by the Federal Reserve at its meeting next week.

Investor attention was also focused on the first U.S. Presidential debate between Kamala Harris and Donald Trump to be held at the National Constitution Center in Philadelphia, Pennsylvania, later today.

The dollar hovered near a one-week high in Asian trading, weighing on gold prices. Oil dipped as worries about Chinese demand offset supply disruptions from Tropical Storm Francine.

China’s Shanghai Composite Index ended 0.3 percent higher at 2,744.19, recovering from an early slide after the U.S. House of Representatives passed legislation to cut off U.S. government funding for Chinese biotech companies deemed national security risks.

Meanwhile, China’s exports grew more than expected in August, while import growth weakened sharply amid weak domestic demand, official data revealed today.

Exports posted annual growth of 8.7 percent, marking the fastest expansion in 17 months. At the same time, imports grew only 0.5 percent, pushing up the trade surplus.

Hong Kong’s Hang Seng Index rose 0.2 percent to 17,234.09 after Alibaba Group announced its shares traded on the Hong Kong bourse have been included in the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect programs. Shares of the tech heavyweight surged 4.2 percent.

Japanese markets extended recent losses as investors looked ahead to upcoming Fed and BoJ policy meetings later this month.

The Nikkei 225 Index slipped 0.2 percent to 36,159.16, extending losses for a sixth straight session. The broader Topix Index settled 0.1 percent lower at 2,576.54 in its fifth straight session of losses.

Drug maker Daiichi Sankyo plunged 8.6 percent after its lung cancer drug with AstraZeneca showed mixed results in a late-stage trial.

Technology stocks performed well, with chip-making equipment maker Tokyo Electron rallying 3.5 percent and Advantest adding 1.2 percent.

Seoul stocks ended lower for a sixth consecutive session, with tech stocks and battery makers pacing the declines. The benchmark Kospi dropped 0.5 percent to 2,523.43.

Samsung Electronics fell 1.9 percent, SK Hynix gave up 1 percent and LG Energy Solution sank 5 percent.

Australian markets ended a tad higher, led by financials. The benchmark S&P/ASX 200 Index edged up 0.3 percent to 8,011.90, while the broader All Ordinaries Index ended up 0.3 percent at 8,217.

Commonwealth Bank of Australia rose 0.6 percent and Macquarie Group advanced 1.6 percent after the country’s prudential regulator proposed to replace bank hybrid bonds with more reliable and less expensive forms of capital.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index finished marginally higher at 12,632.82.

Europe

European stocks were mixed on Monday after snapping a five-day losing streak the previous day.

A cautious undertone prevailed ahead of the televised U.S. presidential debate later today and U.S. inflation readings due later in the week that could influence the interest rate outlook.

Analysts remain divided over whether the Federal Reserve will deliver a regular 25 basis point (bps) rate cut or an outsized 50 bps cut at its September 17-18 policy meeting.

Meanwhile, German consumer price inflation weakened, as initially estimated, in August due to falling energy prices, final data from Destatis showed today.

Consumer price inflation softened to 1.9 percent in August from 2.3 percent in July. The rate matched the provisional estimate published on August 29.

The British pound edged up versus the euro and dollar as new data supported the view that the British economy was on a solid footing.

Official data revealed that the U.K. unemployment rate dropped in the three months to July and the wage growth softened to a two-year low.

The unemployment rate fell to 4.1 percent in the three months to July from 4.2 percent in the preceding period.

Annual growth in average earnings, excluding bonuses, was 5.1 percent in the three months to July, as expected, but weaker than the 5.4 percent posted in the prior period. This was the weakest since 2022.

Capital Economics’ economist Ashley Webb said that further easing in wage growth is a welcome sign but will not be enough to prompt back-to-back 25 basis points interest rate cuts, from 5.00 percent to 4.75 percent in September.

While the French CAC 40 Index is up by 0.3 percent, the German DAX Index is down by 0.4 percent and the U.K.’s FTSE 100 Index is down by 0.5 percent.

In corporate news, AstraZeneca has slumped after its lung cancer drug showed mixed results in a late-stage trial.

Hearing aid maker Amplifon has also plummeted after Apple announced that its latest AirPods earbuds will come with built-in hearing aids.

Meanwhile, Gamma Communications, a provider of voice, data, mobile, and other communication services, has soared after reporting increases in earnings and revenue for the first half, supported by acquisitions.

Centamin has also skyrocketed after AngloGold Ashanti made a $2.5 billion (about R44.6 billion) bid in a mix of shares and cash to acquire the gold miner.

Capgemini has also surged in Paris after Oracle beat on the top and bottom lines for the first quarter and announced it would bring database services to cloud infrastructure market leader Amazon Web Services.

U.S. Economic News

Federal Reserve Vice Chair for Supervision Michael Barr is scheduled to speak on “Basel III Endgame” before the Brookings Institution at 10 am ET.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $58 billion worth of three-year notes.

Stocks In Focus

Shares of Mission Producer (AVO) are soaring in pre-market trading after the avocado producer reported strong fiscal third quarter revenue growth.

Business software giant Oracle (ORCL) is also likely to see initial strength after reporting better than expected fiscal first quarter results and announcing a strategic partnership with Amazon Web Services.

On the other hand, shares of Hewlett Packard Enterprise (HPE) may come under pressure after commenced an offering of $1.35 billion of Series C Mandatory Convertible Preferred Stock.