Upward Momentum May Lead To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a higher opening on Tuesday, with stocks poised to resume their recent upward trend following the long holiday weekend.

The markets are likely to benefit from recent upward momentum, as traders remain optimistic about additional stimulus from Washington.

Recent signs indicating the coronavirus crisis is easing following a recent surge is also likely to generate buying interest as countries around the world continue to ramp up vaccine rollouts.

The positive sentiment also comes following last Friday’s drop by the CBOE Market Volatility Index, which closed below 20 for the first time in nearly a year.

The decrease by the closely watched volatility index suggests there is reduced fear in the markets following the spike seen in reaction to speculative trading in stocks like GameStop (GME).

Traders may be less worried about a substantial pullback by the markets even as some analysts continue to warn the markets are overbought.

A slew of economic data is due to be released in the comings days, including reports on retail sales, industrial production, housing starts, and existing home sales.

Stocks turned in a lackluster performance for much of the trading day on Friday but moved to the upside late in the session. The late-day advance lifted the major averages to new record closing highs.

The Dow underperformed its counterparts but still closed modestly higher, inching up 27.70 points or 0.1 percent to 31,458.40. The Nasdaq climbed 69.70 points or 0.5 percent to 14,095.47 and the S&P 500 rose 18.45 points or 0.5 percent at 3,934.83.

The major averages showed a lack of direction for much of the week but still moved notably higher. The Nasdaq surged up by 1.7 percent, while the S&P 500 and the Dow jumped by 1.2 percent and 1 percent, respectively.

Profit taking contributed to modest weakness early in the trading session, although selling pressure remained subdued.

Recent consolidation efforts have not gained much traction, as traders seem wary of missing out on further upside.

The markets have largely maintained their upward momentum amid optimism about more fiscal stimulus and an easing of the coronavirus crisis.

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

The University of Michigan said its consumer sentiment index fell to 76.2 in February after edging down to 79.0 in January. The drop came as a surprise to economists, who had expected the index to inch up to 80.8.

With the unexpected decrease, the consumer sentiment index slid to its lowest level since hitting 74.1 in August of 2020.

Surveys of Consumers chief economist Richard Curtin said the unexpected deterioration in consumer sentiment was concentrated in expectations and among households with incomes below $75,000.

“Households with incomes in the bottom third reported significant setbacks in their current finances, with fewer of these households mentioning recent income gains than anytime since 2014,” Curtin said.

He added, “Presumably a new round of stimulus payments will reduce financial hardships among those with the lowest incomes.”

Traders have recently looked at weak economic data as a positive for the markets amid the assumption that it will put pressure on lawmakers to provide more stimulus.

Brokerage stocks moved sharply higher over the course of the trading session, driving the NYSE Arca Broker/Dealer Index up by 2.2 percent to a new record closing high.

Significant strength was also visible among energy stocks, which moved higher along with the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index both surged up by 1.9 percent, while the NYSE Arca Oil Index jumped by 1.5 percent.

Tobacco, transportation and steel stocks also saw considerable strength on the day, while utilities stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are inching up $0.14 to $59.61 a barrel after jumping $1.23 to $59.47 a barrel last Friday. Meanwhile, after falling $3.60 to $1,823.20 an ounce in the previous session, gold futures are plunging $22.90 to $1,800.30 an ounce.

On the currency front, the U.S. dollar is trading at 105.66 yen versus the 105.38 yen it fetched on Monday. Against the euro, the dollar is trading at $1.2114 compared to yesterday’s $1.2129.

Asia

Asian stocks rose on Tuesday, with expectations for more fiscal stimulus and global efforts to contain the spread of the coronavirus offering support.

Japanese shares rose amid a weaker yen and significant advances in some heavyweights on optimism about the outlook for the global economy. The recent stock price rally reflected market optimism over the global economic outlook, Bank of Japan Governor Haruhiko Kuroda said.

The Nikkei 225 Index jumped 383.60 points, or 1.3 percent, to 30,467.75, marking its best close since August 1, 1990. The broader Topix closed 0.6 percent higher at 1,965.08.

Market heavyweight SoftBank Group surged 4.2 percent, semiconductor company Screen Holdings soared 6.9 percent and steelmaker Sumitomo Metal Mining climbed 5.1 percent.

Australian markets rose notably to hit an 11-month high as mining behemoth BHP rewarded shareholders with the biggest dividend in its history and National Australia Bank posted a pickup in quarterly profit from the previous two quarters.

The benchmark S&P/ASX 200 Index climbed 48.40 points, or 0.7 percent, to 6,917.30, while the broader All Ordinaries Index ended up 39.60 points, or 0.6 percent, at 7,189.30.

BHP Group shares jumped 2.7 percent after the world’s top miner reported a 16 percent increase in its underlying half-year profit. Rival Rio Tinto rallied 3 percent and South32 advanced 1.5 percent on the back of a surge in commodity prices.

Energy stocks such as Woodside Petroleum, Santos and Origin Energy soared 2-4 percent after oil prices hit 13-month highs on fears of Middle East tensions.

National Australia Bank shares gained 1.1 percent. The country’s second-biggest lender said its first-quarter cash profit was flat versus a year ago.

Westpac Banking Corp. rose half a percent and ANZ added 1 percent as minutes from the Reserve Bank of Australia’s February 2 monetary policy meeting showed Australia’s economy is recovering from the Covid-19 pandemic at a faster than expected pace.

Seoul stocks ended higher for the third straight day as foreign investors extended their buying streak on hopes of a quicker economic recovery. The benchmark Kospi rose 16.25 points, or 0.5 percent, to finish at 3,163.25. Giant internet portal operator Naver rallied 2.2 percent and its rival Kakao added 2.4 percent.

Export prices in South Korea were down 2.3 percent year-on-year in January, the Bank of Korea said in a report, beating forecasts for a decline of 5.1 percent after sinking 5.4 percent in December.

New Zealand shares rebounded from a five-day slide, with the benchmark NZX-50 Index rising 100.16 points, or 0.8 percent, to 12,610.72. Meridian climbed 2.8 percent and Mercury NZ jumped 3.1 percent, while Contact Energy fell 2.1 percent on fund raising reports.

Markets in Taiwan and China were closed for the Lunar New Year holidays. Hong Kong’s Hang Seng index surged 1.90 percent to close at 30,746.66 in its first trading session since Thursday following the Lunar New Year holidays.

Europe

European stocks have struggled for direction on Tuesday as investors keep a wary eye on bond yields. Underlying sentiment has been underpinned by falling coronavirus infection rates, successful rollouts of Covid-19 vaccines in many countries and the possible easing of lockdown restrictions in England.

While the U.K.’s FTSE 100 Index is up by 0.2 percent, the German DAX Index and the French CAC 40 Index are both just below the unchanged line.

Glencore has moved sharply higher. The world’s biggest commodity trader swung to profit in the second half of the year and reinstated its dividend.

Mining giant BHP has also moved to the upside. The company declared a record interim dividend after posting its best first-half profit in seven years.

Meanwhile, drug maker AstraZeneca has dropped despite the World Health Organization approving AstraZeneca/Oxford Covid-19 vaccine for emergency use.

French tire maker Michelin Cie Des Estb has edged down slightly in choppy trade. The company said it expects to deliver segment Operating income in excess of 2.5 billion euros at constant exchange rates and structural free cash flow of around 1 billion euros for fiscal 2021.

In economic news, the euro area economy contracted at a slightly slower than initially estimated pace in the fourth quarter amid Covid-19 control measures, the flash estimate published by Eurostat showed on Tuesday.

Gross domestic product declined 0.6 percent sequentially instead of the 0.7 percent estimated previously. The decrease reversed a record 12.4 percent rebound seen in the third quarter.

On a yearly basis, GDP was down 5 percent, bigger than the 4.3 percent decline in the third quarter but slower than the 5.1 percent drop estimated on February 2.

Separately, survey data from the ZEW – Leibniz Centre for European Economic Research showed German investor confidence unexpectedly improved in February as financial market experts expect the economy to recover within six months.

The ZEW Indicator of Economic Sentiment climbed to 71.2 in February from 61.8 in the previous month. The index was forecast to fall to 59.6.

U.S. Economic Reports

New York manufacturing activity grew at its fastest pace in months in February, according to a report released by the Federal Reserve Bank of New York on Tuesday.

The New York Fed said its general business conditions index climbed to 12.1 in February from 3.5 in January, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to rise to 6.0.

With the much bigger than expected increase, the general business conditions index reached its highest level since hitting 17.0 last September.

At 3 pm ET, San Francisco Federal Reserve President Mary Daly is due to participate in a conversation on the economy, monetary policy and inequality before the virtual University of San Francisco Silk Speaker Series.

Stocks In Focus

Shares of Protective Insurance Corp. (PTVCA, PTVCB) are skyrocketing in pre-market trading after the insurer agreed to be acquired by Progressive (PGR) for $23.30 per share in cash.

Automotive supplier BorgWarner (BWA) is also seeing significant pre-market strength after agreeing to acquire German battery systems maker AKASOL for approximately 754 million euros.

Shares of AutoNation (AN) may also move to the upside after the automotive retailer reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Palantir Technologies (PLTR) are likely to come under pressure after the business analytics company reported an unexpected fourth quarter loss and provided disappointing guidance.