U.S. Stocks May Lack Direction Ahead Of Key Inflation Data

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 following the strong performance seen last week.

Amid a quiet day on the U.S. economic front, traders may take a step back to assess the recent strength in the markets, which saw the S&P 500 reach a new record closing high last Friday.

Traders may also be reluctant to make significant moves ahead of the release of key U.S. inflation data in the coming days.

On the heels of last Friday’s report showing an unexpected decrease in U.S. employment, the data could impact the outlook for interest rates.

“Consensus forecasts point to a modest easing in both headline and core CPI, which, if realized, would reinforce the view that the Fed can afford to remain patient,” said Daniela Hathorn, Senior Market Analyst at Capital.com.

She added, “That would likely keep downward pressure on Treasury yields and provide further support for risk assets.”

After moving to the upside early in the session, stocks remained mostly higher throughout the trading day on Friday. The major averages all ended the day in positive territory, with the S&P 500 reaching a new record closing high.

The tech-heavy Nasdaq led the way higher, jumping 342.26 points or 1.3 percent to 26,690.62. The S&P 500 also climbed 47.68 points or 0.6 percent to 7,757.64, while the narrower Dow rose 151.83 points or 0.3 percent to 54,036.93.

For the week, the Nasdaq spiked by 5.2 percent, while the S&P 500 and the Dow surged by 3.6 percent and 3 percent, respectively.

The strength on Wall Street came amid easing concerns about the outlook for interest rates after the Labor Department released a report unexpectedly showing a modest decrease in U.S. employment in the month of July.

The Labor Department said non-farm payroll employment fell by 23,000 jobs in July after rising by a downwardly revised 20,000 jobs in June.

Economists had expected employment to climb by 88,000 jobs compared to the addition of 57,000 jobs originally reported for the previous month.

While the report points to some weakness in the labor market, the data is also seen as decreasing the chances of the Federal Reserve raising interest rates next month.

Meanwhile, the report also said the unemployment rate edged down to 4.1 percent in July from 4.2 percent in June. The unemployment rate was expected to remain unchanged.

Gold stocks moved sharply higher along with the price of the precious metal, driving the NYSE Arca Gold Bugs Index up by 7.4 percent to its best closing level in well over two months.

Substantial strength was also visible among computer hardware stocks, as reflected by the 4.4 percent spike by the NYSE Arca Computer Hardware Index.

Biotechnology stocks also showed a significant move to the upside, with the NYSE Arca Biotechnology Index surging by 3.2 percent.

Semiconductor, housing and software stocks are saw considerable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are jumping $1.36 to $79.54 a barrel after climbing $0.89 to $78.18 a barrel last Friday. Meanwhile, after surging $100.10 to $4,399.70 an ounce in the previous session, gold futures are slipping $12.30 to $4,387.40 an ounce.

On the currency front, the U.S. dollar is trading at 158.85 yen versus the 157.78 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1546 compared to last Friday’s $1.1558.

Asia

Asian stocks rose broadly on Monday after data showed U.S. employers unexpectedly cut jobs in July and hiring figures for the prior two months were also revised downward, helping ease the risk of an immediate U.S. interest-rate hike.

Regional gains remained limited, however, as Tehran warned that it will not reopen the Strait of Hormuz unless the United States meets a series of conditions, denting hopes for a return to stability in global energy markets.

The U.S. dollar edged up from a two-month low in Asian trading ahead of key U.S. inflation readings due later in the week.

Brent crude futures were little changed near $84 a barrel after rising more than 5 percent over the previous three sessions.

Gold extended gains to trade at $4,353 an ounce after surging over 7 percent to reach its highest level in seven weeks on Friday.

China’s Shanghai Composite Index climbed 0.7 percent to 3,966.59 as signs of persistent deflationary pressures in the world’s second-largest economy fueled speculation that Beijing could roll out more stimulus to prop up domestic demand. Hong Kong’s Hang Seng Index jumped 1.1 percent to 25,937.49.

According to official data released on Sunday, China’s consumer price Index rose 0.5 percent year-on-year in July, below forecasts for 0.8 percent growth following June’s 1 percent gain. Producer price growth slowed to 3.5 percent from 4.1 percent in the previous month.

Japanese markets rose sharply while the yen steadied after the “Summary of Opinions” from the Bank of Japan’s July monetary policy meeting revealed a divided board regarding the pace of future interest rate hikes.

The Nikkei average surged 2.1 percent to 66,970.22, reaching its highest level in nearly four weeks. The broader Topix Index gained 0.6 percent to close at 4,100.61.

Seoul stocks rose notably to snap a two-day losing streak on fading Fed rate hike bets. The Kospi Index advanced 0.7 percent to 6,299.66.

Among the prominent gainers, LG Energy Solution climbed 2.1 percent and Hyundai Motor rallied 3.2 percent.

Australian markets ended lower, with banks falling sharply ahead of the Reserve Bank of Australia’s policy decision, due on Tuesday.

The benchmark S&P/ASX 200 Index dropped 0.3 percent to 9,232.60 ,while the broader All Ordinaries Index settled 0.2 percent lower at 9,424.10.

Westpac Banking Corp shares slumped 5.9 percent after the lender reported a sharp drop in mortgage applications following changes to tax laws and warned that housing credit growth could halve next year.

Peers ANZ, Commonwealth Bank and NAB all fell around 2 percent while mining giants BHP and Rio Tinto both rose around 1 percent. Treasury Wine Estates soared 4.2 percent after announcing it would overhaul its U.S. business.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index closed up 0.5 percent at 13,888.24, snapping a two-session losing streak.

Europe

European stocks are mixed on Monday as uncertainty over the reopening of the Strait of Hormuz lingers and investors look forward to the release of U.S. inflation readings later in the week for additional clues on the Fed’s rate trajectory.

Iran has warned that it will not reopen the Strait of Hormuz unless the United States meets a series of conditions, raising worries that U.S. President Donald Trump may relaunch the military option that he shelved only days ago.

However, in an interview with Axios on Sunday, Trump signaled patience and suggested that he’s prepared to allow economic pressure on Iran to mount rather than escalate militarily.

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

In corporate news, shares of trading platform Plus500 have soared in London after the company posted record first-half results.

Building products maker Marshalls has moved sharply lower after reporting a marginal decline in first-half revenue.

Aryzta, the Swiss-Irish baked goods group, has also shown a significant move to the downside after reporting lower first-half profit and revenue.

In economic releases, U.K. permanent staff appointments stabilized in July, ending a 45-month downturn, the KPMG/REC Report on Jobs revealed.

Temp billing posted the biggest growth in the last three years as more employers sought flexible workforce solutions.

U.S. Economic News

No major U.S. economic data is scheduled to be released today.