U.S. Stocks May Lack Direction Ahead Of Fed Announcement

The major U.S. index futures are currently pointing to a roughly flat open on Monday, with stocks likely to show a lack of direction in early trading.

Traders may be reluctant to make significant moves ahead of the Federal Reserve’s monetary policy announcement on Wednesday.

The Fed is widely expected to maintain its ultra-easy monetary policy, but traders will be paying close attention to any changes to the accompanying statement that may signal a shift in the near future.

Earnings season will also pick up steam in the coming days, with a slew of big-name companies scheduled to release their quarterly results.

Tesla (TSLA), General Electric (GE), UPS (UPS), Alphabet (GOOGL), Microsoft (MSFT), Boeing (BA), Apple (AAPL), McDonald’s (MCD), Amazon (AMZN), and Exxon Mobil (XOM) are just some of the companies due to report their results this week.

In U.S. economic news, a report released by the Commerce Department showed new orders for U.S. manufactured durable goods increased by much less than expected in the month of March.

After coming under pressure over the course of Thursday’s session, stocks showed a strong move back to the upside during trading on Friday. The major averages all moved to the upside on the day, although the Dow underperformed its counterparts.

The major averages pulled back off their highs going into the close but remained firmly positive. The Dow climbed 227.59 points or 0.7 percent to 34,043.49, while the Nasdaq surged up 198.40 points or 1.4 percent to 14,016.81 and the S&P 500 jumped 45.19 points or 1.1 percent to 4,180.17.

Despite the advance on the day, the major averages closed modestly lower for the week. The Dow slid by 0.5 percent, the Nasdaq fell by 0.3 percent and the S&P 500 edged down by 0.1 percent.

The rebound on Wall Street partly reflected the volatility seen over the past few sessions, which saw the major averages show big swings back-and-forth.

After coming under pressure early in the week, stocks showed a strong move back to the upside during trading on Wednesday.

Stocks subsequently experienced choppy trading early on Thursday before pulling back sharply on reports of President Joe Biden’s plans to raise capital gains tax rates.

The major averages slid back toward the lower end of a recent trading range, potentially leading to the renewed buying interest seen in today’s trading.

Optimism about the economic recovery has helped prop up the markets, although concerns about high valuations and surging coronavirus cases overseas have led to worries about the near-term outlook.

The Dow underperformed the broader Nasdaq and S&P 500 due in part to a steep drop by shares of Intel (INTC), with the semiconductor giant tumbling by 5.3 percent.

The decline by Intel comes after the company reported better than expected first quarter results but provided guidance below analyst estimates.

Dow components American Express (AXP) and Honeywell (HON) also moved to the downside despite reporting better than expected quarterly earnings.

In U.S. economic news, the Commerce Department released a report showing a substantial rebound in new home sales in the month of March.

The report showed new home sales skyrocketed by 20.7 percent to an annual rate of 1.021 million in March after plunging by 16.2 percent to a revised rate of 846,000 in February.

Economists had expected new home sales to spike by 14.3 percent to a rate of 886,000 from the 775,000 originally reported for the previous month.

With the rebound, new home sales soared from the eight-month low set in February to their highest level since August of 2006.

Airline stocks moved sharply higher on the day, with the NYSE Arca Airline Index soaring by 3.4 percent. The index continued to rebound after falling a nearly two-month closing low on Tuesday.

Significant strength was also visible among banking stocks, as reflected by the 2.9 percent spike by the KBW Bank Index.

Computer hardware stocks also saw considerable strength on the day, driving the NYSE Arca Computer Hardware Index up by 2.7 percent to a record closing high.

Brokerage, steel and semiconductor stocks also showed strong moves to the upside, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are tumbling $1.24 to $60.90 a barrel after climbing $0.71 to $62.14 a barrel last Friday. Meanwhile, after falling $4.20 to $1,777.80 an ounce in the previous session, gold futures are sliding $7.60 to $1,770.20 an ounce.

On the currency front, the U.S. dollar is trading at 107.99 yen versus the 107.88 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.2082 compared to last Friday’s $1.2097.

Asia

Asian stocks ended mixed on Monday as investors kept a wary eye on the Covid-19 surge in Japan and India and awaited cues from key central bank meetings.

Chinese and Hong Kong shares fell amid fears that further tightening of credit conditions would drag on growth. China’s Shanghai Composite Index tumbled 33 points, or 1 percent, to 3,441.17, while Hong Kong’s Hang Seng Index ended down 125.92 points, or 0.4 percent, at 28,952.83.

Meanwhile, Japanese shares eked out modest gains despite a deteriorating Covid-19 situation in the country. The Nikkei 225 Index rose 105.60 points, or 0.4 percent, to 29,126.23 ahead of Bank of Japan’s monetary policy decision due on Tuesday. The broader Topix ended 0.2 percent higher at 1,918.15.

Travel-related stocks rebounded, with ANA Holdings soaring 5.8 percent after the airline forecast a smaller than expected full-year loss. Central Japan Railway, West Japan Railway and East Japan Railway jumped 3-5 percent.

Australian stocks fluctuated in a narrow range before ending marginally lower after the country’s fourth-biggest city entered a three-day lockdown on Saturday to prevent the spread of Covid-19.

The benchmark S&P/ASX 200 Index dropped 15.10 points, or 0.2 percent, to 7,045.60, while the broader All Ordinaries Index ended down 12.90 points, or 0.2 percent, at 7,307.80.

Gold miners Evolution Mining, Newcrest and Northern Star Resources fell 2-3 percent after bullion prices softened on Friday on strong U.S. economic data.

Mining heavyweights BHP and Rio Tinto rose 0.6 percent and 1.1 percent, respectively, after iron ore prices set new records on strong global steel demand.

Lender Westpac edged down slightly after two days of gains, while NAB gained 0.8 percent. Tech stocks finished broadly lower with modest losses.

Nib Holdings soared 10.2 percent after the health insurer reinstated profit guidance for the first time since pandemic lockdowns began.

Markets in New Zealand were closed for ANZAC Day. Seoul stocks rallied to end higher for a third consecutive session as progress in the local vaccination campaign and strong U.S. economic data fueled hopes of a quick economic recovery.

Over the weekend, South Korea clinched a deal with Pfizer to secure additional vaccines for 20 million people amid fears of spiking infections at home. The benchmark Kospi jumped 31.43 points, or 1 percent, to 3,217.53. Financial, transport and heavy industry shares were among the top gainers.

Europe

European stocks are little changed in lackluster trading on Monday as Covid-19 worries persist and survey results from the ifo Institute showed German business morale improved by less than expected in April amid a third wave of Covid-19 infections and bottlenecks in production.

The business confidence index rose to 96.8 in April from 96.6 in the previous month. The index was forecast to rise to 97.8.

Travel stocks are climbing after a top European Union official said on Sunday American holidaymakers who have received a coronavirus vaccine should be able to travel to Europe by the summer.

Some of Italy’s coronavirus restrictions are being eased in regions designated ‘yellow’ zones starting today. France plans to ease its lockdown restrictions next month, allowing its citizens to travel within the country.

While the French CAC 40 Index has risen by 0.3 percent, the U.K.’s FTSE 100 Index is up by 0.2 percent and the German DAX Index is up by 0.1 percent.

Travel-related stocks such as Lufthansa, EasyJet and International Airlines Group have jumped on hopes of a revival in travel demand.

Rolls Royce Holding shares have soared after the aerospace company said it was in constructive talks with Spain over the sale of its Spanish unit ITP Aero.

Engineering firm IMI has also shown a substantial move to the upside after raising its full-year earnings guidance.

Crédit Agricole shares have also advanced. The French lender said late Friday that its Italian subsidiary Credit Agricole Italia SpA now owns around 91.17 percent of Credito Valtellinese’s share capital.

Meanwhile, Swedish auto giant Volvo has dropped after saying it may see further disruption from the semiconductor shortage.

Nestle has also edged lower. The Swiss food giant confirmed that it is in discussions to buy nutritional supplement maker The Bountiful Company.

Philips has tumbled. The Dutch firm said it anticipates a hit of up to 250 million euros ($302 million) from a possible safety risk in some sleep and respiratory care products.

Austrian sensor maker AMS has also fallen after a broker downgrade on concerns around the company potentially losing product supply deals at Apple.

British consumer goods company Unilever, beverage company Diageo and tobacco firm British American Tobacco have also dropped as the pound has strengthened on optimism about the economic outlook.

Volkswagen AG shares have also slid after the Financial Times reported the German company had warned top managers to brace for a bigger production hit in the second quarter due to a global chip shortage.

U.S. Economic Reports

A report released by the Commerce Department on Monday showed new orders for U.S. manufactured durable goods increased by much less than expected in the month of March.

The Commerce Department said durable goods orders rose by 0.5 percent in March after falling by a revised 0.9 percent in February.

Economists had expected durable goods orders to spike by 2.5 percent compared to the 1.2 percent slump that had been reported for the previous month.

The much weaker than expected durable goods orders growth was partly due to a continued decrease in orders for transportation equipment.

Excluding the drop in orders for transportation equipment, durable goods orders jumped by 1.6 percent in March after dipping by 0.3 percent in February. The increase matched economist estimates.

At 11:30 am ET, the Treasury Department is scheduled to announce the results of this month’s auction of $60 billion worth of two-year notes.

The Treasury Department is also due to announce the results of this month’s auction of $61 billion worth of five-year notes at 1 pm ET.

Stocks In Focus

Shares of Otis Worldwide (OTIS) are seeing significant pre-market strength after the maker of elevators and escalators reported better than expected first quarter results and raised its full-year guidance.

Climate control products manufacturer Lennox International (LII) is also likely to move to the upside after reporting first quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Etsy (ETSY) may see initial weakness after KeyBanc downgraded its rating on the online crafts marketplace to Sector Weight from Overweight.