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 after moving sharply higher last week.

Traders may look to cash in on last week's rally, which saw the major averages stage a significant recovery from the sharp pullback seen earlier in November.

The major averages have closed higher for five consecutive sessions, clawing their way back toward their record highs.

Stocks have recently benefitted from renewed optimism about the outlook for interest rates following dovish comments from leading Federal Reserve officials.

CME Group's FedWatch Tool is currently indicating an 87.4 percent chance the Fed will lower interest rates by another quarter point at its monetary policy meeting next week.

However, the release of key U.S. economic data in the coming days could impact Fed officials' thinking, potentially keeping traders on edge.

With traders returning to their desks following the Thanksgiving Day holiday on Thursday, stocks extended their pre-holiday rally during trading on Friday. The major averages all moved to the upside on the day, closing higher for the fifth consecutive session.

The major averages ended the day just off their highs of the session. The Dow climbed 289.30 points or 0.6 percent to 47,716.42, the Nasdaq advanced 151.00 points or 0.7 percent to 23,365.69 and the S&P 500 rose 36.48 points or 0.5 percent to 6,849.09.

For the holiday-interrupted week, the Nasdaq spiked by 4.9 percent, the S&P 500 surged by 3.7 percent and the Dow jumped by 3.2 percent.

With the rally over the past several days, the Dow rose by 0.3 percent for the month of November and the S&P 500 crept up by 0.1 percent.

The Nasdaq still slumped by 1.5 percent for the month, although the tech-heavy index had plunged by as much as 7.7 percent at its worst levels last Friday.

The recent advance has helped the major averages climb well off their recent lows, as traders seemingly shrug off short-lived concerns about valuations.

Renewed optimism about the outlook for interest rates has contributed to the recent rebound following dovish comments from leading Federal Reserve officials.

Concerns the Fed may leave interest rates unchanged at its December meeting contributed to a pullback by stocks earlier in the month.

Trading activity remained somewhat subdued, however, as some traders likely remained away from their desks following the holiday.

A trading disruption at the Chicago Mercantile Exchange earlier in the day along with an early close on Wall Street may also have kept some traders on the sidelines along with a lack of major U.S. economic data.

Computer hardware stocks turned in some of the market's best performances on the day, with the NYSE Arca Computer Hardware Index surging by 2.5 percent.

Shares of SanDisk (SNDK) spiked by 3.8 percent as the storage company joined the S&P 500 before the start of the day's trading.

A sharp increase by the price of gold also contributed to significant strength among gold stocks, as reflected by the 2.1 percent jump by the NYSE Arca Gold Bugs Index.

Semiconductor, energy and software stocks also saw notable strength on the day, while some weakness was visible among pharmaceutical stocks.

Commodity, Currency Markets

Crude oil futures are climbing $0.58 to $59.13 a barrel after slipping $0.10 to $58.55 barrel last Friday. Meanwhile, after surging $52.60 to $4,254.90 an ounce in the previous session, gold futures are jumping $33 to $4,287.90 an ounce.

On the currency front, the U.S. dollar is trading at 154.82 yen versus the 156.15 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1642 compared to last Friday's $1.1595.

Asia

Asian stocks ended mixed on Monday as Chinese factory activity data disappointed and Bank of Japan Governor Kazuo Ueda gave one of his clearest indications that his board might increase interest rates soon.

Risk aversion ahead of a slew of U.S. economic data due this week as well as speculation over the appointment of the next Federal Reserve Chair also kept investors on edge.

Gold held near a six-week high in Asian trading as the dollar weakened on Fed rate cut expectations. Oil prices climbed nearly 2 percent following additional Ukrainian attacks on Russian energy infrastructure and an escalation in tensions between the United States and Venezuela.

China's Shanghai Composite Index climbed 0.7 percent to 3,914.01 as increased hopes for a Fed rate cut offset data that showed China's manufacturing engine lost further steam in November.

China's official manufacturing PMI improved slightly from 49.0 to 49.2 in November but remained in contraction for the eighth consecutive month.

The private RatingDog manufacturing PMI surprised to the downside, dropping from 50.6 to 49.9 as the country's economic slowdown deepens.

Hong Kong's Hang Seng Index advanced by 0.7 percent to 26,033.26, led by technology heavyweights.

Japanese markets tumbled, the yen rose against the dollar and the yield on the two-year government bonds rose to its highest level since 2008 after Bank of Japan Governor Kazuo Ueda said the central bank will weigh the pros and cons of raising its policy rate at its December 18-19 policy meeting.

The Nikkei 225 Index slumped 1.9 percent to 49,303.28, while the broader Topix Index settled 1.2 percent lower at 3,338.33.

Among the prominent decliners, Uniqlo brand owner Fast Retailing gave up 2.1 percent, chip-testing equipment maker Advantest lost 4.3 percent and optic fibre cable maker Fujikura slumped 8.9 percent.

Banks like Mitsubishi UFJ Financial and Sumitomo Mitsui Financial rose around 1.6 percent each on BOJ rate hike bets.

Seoul stocks ended lower after the release of mixed economic readings, with manufacturing activity contracting for the second consecutive month in November, while exports surged on strong semiconductor and auto demand. The Kospi slipped 0.2 percent to 3,920.37.

Australian markets declined, with banks underperforming on concerns the Reserve Bank of Australia may have reached the end of its easing cycle.

The benchmark S&P/ASX 200 Index dropped 0.6 percent to 8,565.20 amid caution ahead of the quarterly GDP report due on Wednesday.

Investor sentiment was also hurt by an outage to stock exchange operator ASX's announcements platform. The broader All Ordinaries Index closed down 0.6 percent at 8,866.40.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 Index closed 0.3 percent lower at 13,448.49, pressured by heavy losses in the financial sector.

Europe

European stocks have moved to the downside during trading on Monday after closing November on a robust note amid optimism surrounding potential U.S. rate cuts.

The German DAX Index is down by 1.3 percent, the French CAC 40 Index is down by 0.7 percent and the U.K.'s FTSE 100 Index is down by 0.2 percent as investors await key U.S. economic data as well as early holiday spending signals from Black Friday and Cyber Monday.

In corporate news, Airbus shares have tumbled in Paris. The aircraft maker has recalled thousands of its A320 family aircraft due to potential failures in the ELAC control system caused by powerful solar flares.

EasyJet has also moved to the downside after announcing it has completed software updates on its A320 aircraft family over the weekend.

Melrose Industries, a key player in the aerospace and defense sector, has also moved sharply lower in London after naming Ross McCluskey as its new CFO.

Defense stocks are also under pressure after U.S. President Donald Trump said Sunday there was a "good chance" of a deal to end the war in Ukraine.

U.S. Economic News

The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of November at 10 am ET. The ISM's manufacturing PMI is expected to inch up to 49.0 in November after slipping to 48.7 in October, although a reading below 50 would still indicate contraction.

Also at 10 am ET, the Commerce Department is due to release its report on construction spending in the month of October. Construction spending is expected to edge down by 0.1 percent in October after rising by 0.2 percent in September.