Profit Taking May Contribute To Initial Pullback On Wall Street

(RTTNews) - The major U.S. index futures are currently pointing to a lower open on Monday, with stocks likely to give back ground following the substantial rally seen during the previous session.

Profit taking may contribute to initial weakness on Wall Street, as traders look to cash in on the strong gains posted last Friday, which lifted the Dow to a new record closing high.

The rally seen during last Friday's session came as remarks from Federal Reserve Chair Jerome Powell seemed to indicate the central bank is likely to lower interest rates next month.

Overall trading activity may be somewhat subdued, however, as traders look ahead to several key events later this week.

Traders are likely to keep a close eye on earnings news from Nvidia (NVDA), with the AI darling and market leader due to report its second quarter results after the close of trading on Wednesday.

The latest U.S. economic data is also likely to attract attention, as the Commerce Department is due to release a report on Friday that includes the Fed's preferred readings on consumer price inflation.

Reaction to reports on durable goods orders, consumer confidence and second quarter GDP may also impact trading in the coming days.

After trending lower over the past several sessions, stocks showed a substantial move back to the upside during trading on Friday. The major averages all moved sharply higher on the day, with the Dow reaching a new record closing high.

The major averages ended the day well off their best levels but still posted strong gains. The Dow shot up 846.24 points or 1.9 percent to 45,631.74, the Nasdaq surged 396.22 points or 1.9 percent to 21,496.53 and the S&P 500 jumped 96.74 points or 1.5 percent to 6,466.91.

For the week, the major averages turned in a mixed performance. While the Nasdaq slid by 0.6 percent, the S&P 500 rose by 0.3 percent and the Dow leapt by 1.5 percent.

The rally on Wall Street came in reaction to Powell's highly-anticipated speech before the Jackson Hole Economic Symposium.

While Powell touched only briefly on the outlook for monetary policy, his remarks have increased investor confidence that the Fed will lower interest rates next month.

Powell noted the labor market remains near maximum employment and inflation has come down a great deal from its post-pandemic high but cautioned "the balance of risks appears to be shifting."

He noted interest rates are a full percentage point lower than a year ago and said the "stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance."

"Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," Powell added.

The Fed Chief reiterated that monetary policy is not on a "preset course" and stressed that future interest rate decisions would be "based solely on [officials'] assessment of the data and its implications for the economic outlook and the balance of risks."

Following Powell's remarks, CME Group's FedWatch Tool is currently indicating an 83.3 percent chance the Fed will lower rates by a quarter point next month, up from 75.0 percent on Thursday.

"Jerome Powell's comments today were more dovish, than many, including myself expected," said Larry Tentarelli, Chief Technical Strategist for Blue Chip Daily Trend Report.

He added, "Our view is to expect a September rate cut and sectors that should benefit the most include home construction, small caps and banks."

Airline stocks turned in some of the market's best performances on the day, with the NYSE Arca Airline Index soaring by 5.7 percent to its best intraday level in nearly six months.

Substantial strength was also visible among oil service stocks, as reflected by the 5.1 percent spike by the Philadelphia Oil Service Index. With the surge, the index reached a four-month closing high.

Housing stocks also showed a particularly strong move to the upside, driving the Philadelphia Housing Sector Index up by 4.5 percent to its best closing level of the year.

Networking, steel and computer hardware stocks also saw significant strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are climbing $0.40 to $64.06 a barrel after inching up $0.14 to $63.66 a barrel last Friday. Meanwhile, after surging $36.90 to $3,418.50 an ounce in the previous session, gold futures are edging down $3.30 to $3,415.20 an ounce.

On the currency front, the U.S. dollar is trading at 147.43 yen versus the 146.94 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1696 compared to last Friday's $1.1718.

Asia

Asian stocks rose broadly on Monday as Federal Reserve Chair Jerome Powell's dovish signals at the Jackson Hole symposium opened the door to an interest rate cut next month.

Fed fund futures currently price in an 84 percent chance of a quarter-point rate cut in September, and at least 100 basis points of easing to 3.25-3.5 percent by the middle of next year.

Investors also awaited Nvidia's earnings results due this week that could help justify the sector's stratospheric valuations.

Chinese shares jumped on easing trade tensions and hopes for more policy support. The Shanghai Composite Index rallied 1.5 percent to 3,883.56, setting a new decade high.

Hong Kong's Hang Seng Index surged 1.9 percent to 25,829.91, led by technology stocks.

Japanese markets eked out modest gains, boosted by tech stocks on optimism for looser monetary policy in the United States.

The Nikkei 225 Index rose 0.4 percent to 42,807.82, extending gains for a second consecutive session. The broader Topix Index settled 0.2 percent higher at 3,105.49.

Technology investor SoftBank Group rallied 3.5 percent after the Trump administration said it would take a 9.9 percent stake in Intel for $8.9 billion.

Bathroom fixture manufacturer TOTO surged 8.4 percent after announcing plans to invest 30 billion yen to expand its factory in Morrow, Georgia.

Seoul stocks rose for a third day running, with nuclear energy, chip and pharmaceutical shares surging ahead of a key summit between Seoul and Washington. The Kospi jumped 1.3 percent to 3,209.86.

Australian markets finished marginally higher as retailers fell ahead of their earnings results, offsetting gains in the mining and financial sectors.

The benchmark S&P/ASX 200 Index ended little changed at 8,972.40, giving up early gains after rising nearly 1 percent to a record high in initial trade. The broader All Ordinaries Index crept up 0.1 percent to 9,245.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 Index rose 0.3 percent to 13,079.50 after data showed retail sales in the country, a measure of consumer spending, unexpectedly increased in the second quarter.

Europe

European stocks have drifted lower on Monday ahead of key inflation releases from Germany, France, Italy, and Spain later in the week.

Traders also await earnings from AI chipmaker Nvidia to determine whether the tech rally is back on or if there's further to go in the rotation trade.

The pan-European STOXX 600 Index has dipped 0.2 percent to 560.10. The German DAX Index is also down by 0.2 percent, while the French CAC 40 Index is down by 0.7 percent. The U.K. markets remain closed for a public holiday.

JDE Peets NV shares soared on news that Keurig Dr Pepper will acquire the Dutch coffee and tea company in a 15.7-billion-euro ($18.4 billion) deal.

Denmark's Orsted has slumped after the U.S. government ordered the wind farm developer to halt construction of an almost completed project near Rhode Island. Peer Vestas Wind and Siemens Energy have also tumbled.

French drug maker Valneva has also plummeted after its shot for a mosquito-borne disease was suspended in the United States following reports of "serious adverse events."

U.S. Economic News

The Commerce Department is scheduled to release its report on new home sales in the month of July at 10 am ET. Economists expected new home sales to rise to an annual rate of 630,000 in July after climbing to a rate of 627,000 in June.

At 3:15 pm ET, Dallas Federal Reserve President Lorie Logan is due to speak and participate in a panel before the Bank of Mexico Centennial Conference.

New York Federal Reserve President John Williams is scheduled to deliver the keynote before the Bank of Mexico Centennial Conference at 7:15 pm ET.