Steep Drop By Oil Prices May Lead To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to initial strength on Wall Street on Monday, with stocks likely to move mostly higher after turning in a mixed performance last week.

Early buying interest may be generated amid a steep drop by the price of oil, as crude oil for December delivery is plummeting $4.36 to $67.42 a barrel.

The nosedive by the price of crude oil comes as Israel’s retaliatory attack against Iran over the weekend did not damage the Islamic republic’s energy facilities.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of key U.S. economic data later in the week.

The monthly jobs report as well as a report on personal income and spending that includes the Federal Reserve’s preferred inflation readings are likely to be in the spotlight.

Reports on third quarter GDP, consumer confidence, pending home sales and manufacturing sector activity may also attract some attention.

The data could impact the outlook for the economy as well as expectations regarding how quickly the Fed will lower interest rates.

Earnings news is also likely to be in focus in the coming days, with Alphabet (GOOGL), Amazon (AMZN), Exxon Mobil (XOM), Intel (INTC), McDonald’s (MCD), Meta Platforms (META), Microsoft (MSFT) and Pfizer (PFE) among the companies due to report their quarterly results.

After ending Thursday’s session on opposite sides of the unchanged line, the major U.S. stock indexes turned in another mixed performance during trading on Friday. While the tech-heavy Nasdaq added to yesterday’s strong gain, the Dow extended its losing streak to five sessions.

The Nasdaq reached a new record intraday high in early trading but gave back ground over the course of the session before ending the day up 103.12 points or 0.6 percent at 18,518.61.

Meanwhile, the Dow slid 259.96 points or 0.6 percent to 42,114.40, pulling back well off last Friday’s record closing high. The S&P 500 also edged down 1.74 points or less than tenth of a percent to 5,808.12.

The major averages also turned in a mixed performance for the week. The Dow tumbled by 2.7 percent and the S&P 500 slumped by 1.0 percent, but the Nasdaq rose by 0.2 percent.

Stocks moved mostly higher early in the session, with the major averages all moving to the upside amid ongoing optimism about the outlook for the economy.

Adding to the economic optimism, the University of Michigan released revised data showing consumer sentiment unexpectedly improved in the month of October.

The University of Michigan said its consumer sentiment index for October was upwardly revised to 70.5 from a preliminary reading of 68.9. Economists had expected the index to be upwardly revised slightly to 69.0.

With the bigger than expected upward revision, the consumer sentiment index is now modestly above the final September reading of 70.1.

The consumer sentiment index has now increased for the third consecutive month, reaching its highest level since hitting 77.2 in April.

Buying interest waned over the course of the session, however, as treasury yields rebounded following yesterday’s pullback amid lingering concerns the Federal Reserve will lower interest rates slower than previously anticipated.

The Fed is still widely expected to lower rates by a quarter point next month, but CME Group’s FedWatch Tool currently indicates a 24.0 percent chance the central bank will leave rates unchanged in December.

The extended losing streak by the Dow came amid notable declines by shares of McDonald’s (MCD), Dow Inc. (DOW) and Travelers (TRV).

Airline stocks showed a substantial rebound after falling sharply on Thursday, with the NYSE Arca Airline Index surging by 2.0 percent.

A sharp increase by the price of crude oil also contributed to significant strength among oil service stocks, as reflected by the 1.3 percent gain posted by the Philadelphia Oil Service Index.

On the other hand, gold stocks came under pressure despite a modest increase by the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 2.1 percent.

Interest rate-sensitive utilities and housing stocks also saw notable weakness amid lingering concerns about the outlook for rates.

Commodity, Currency Markets

Crude oil futures are plummeting $4.36 to $67.42 a barrel after jumping $1.59 to $71.78 a barrel last Friday. Meanwhile, after rising $5.70 to $2,754.60 an ounce in the previous session, gold futures are slipping $9.90 to $2,744.70 an ounce.

On the currency front, the U.S. dollar is trading at 152.58 yen versus the 152.31 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0818 compared to last Friday’s $1.0796.

Asia

Asian stocks rose broadly on Monday, with Japanese markets leading regional gains after the country’s ruling Liberal Democratic party lost its majority in Parliament’s lower house in weekend elections, triggering a sharp fall in the yen to a three-month low and boosting export-related shares.

The dollar firmed up and gold inched lower amid heightened global uncertainties and ahead of key U.S. inflation, GDP and labor market data due later in the week.

Oil prices were down more than 4 percent in Asian trading after Israel’s attack on Iran over the weekend avoided oil and nuclear facilities and Tehran signaled a measured response.

China’s Shanghai Composite Index climbed 0.7 percent to 3,322.20 ahead of key economic activity readings due this week.

Investors shrugged off data that showed China’s industrial profits in September dropped at its fastest pace since the pandemic.

Hong Kong’s Hang Seng Index finished marginally higher at 20,599.36 after a volatile session.

Japanese markets logged strong gains as a weaker yen lifted exporters like Honda Motor, Toyota, Sony and Nintendo up by 2-4 percent.

The Nikkei 225 Index jumped 1.8 percent to 38,605.53 as the ruling party defeat had been greatly factored in by markets. The broader Topix Index closed 1.5 percent higher at 2,657.78.

Seoul stocks rallied on the back of gains in the technology sector, with heavyweight Samsung Electronics rising 3.9 percent.

Korea Zinc jumped 3.8 percent after announcing it has secured 9.85 percent of the company’s shares in a $1.5 billion buyback. The Kospi closed up 1.1 percent at 2,612.43.

Australian markets ended modestly higher as financials lagged behind, offsetting gains in the mining sector propelled by spiking iron ore prices.

The benchmark S&P/ASX 200 Index inched up 0.1 percent to 8,221.50 ahead of upcoming domestic inflation data. The broader All Ordinaries Index settled 0.1 percent higher at 8,478.20.

The New Zealand market was closed for the Labour Day holiday.

Europe

European stocks are turning in a mixed performance on Monday ahead of a busy week for earnings and economic releases.

The Eurozone will reveal preliminary flash GDP, consumer confidence and economic sentiment data on Wednesday, with investors looking for clues on how aggressively the European Central Bank will cut interest rates going forward.

Euro zone yields climbed, and the British pound was seeing a sideways movement ahead of British Prime Minister Sir Keir Starmer’s new government’s first budget to be unveiled on Wednesday and the release of the widely watched monthly U.S. jobs report due on Friday.

In the run-up to the U.K. Budget, a survey showed business confidence in the U.K. dropped to a four-month low in October.

While the French CAC 40 Index is up by 0.1 percent, the German DAX Index is down by 0.3 percent and the U.K.’s FTSE 100 Index is down by 0.5 percent.

Energy stocks traded lower, with BP Plc and peer Shell posting notable losses as crude prices plunged to four-week lows amid easing fears of a Middle East war.

Investors breathed a sigh of relief as Israeli strikes on Iran over the weekend avoided the OPEC member’s oil facilities.

Philips shares have also plunged after the Dutch medical devices maker cut its annual sales outlook, citing deteriorating demand from consumers and hospitals in China.

Telecommunications company KPN has also shown a significant move to the downside despite reiterating its full-year 2024 outlook.

Meanwhile, Eurofins Scientific SE has jumped. The company, which is focused on bio-analytical testing said that it has inked a deal with Synlab to acquire its clinical diagnostics operations in Spain for an undisclosed amount.

U.S. Economic News

At 11:30 am ET, the Treasury Department is scheduled to announce the results of this month’s auction of $69 billion worth of two-year notes.

The Treasury Department is also due to announce the results of this month’s auction of $70 billion worth of five-year notes at 1 pm ET.