The major U.S. index futures suggest a relatively flat opening on Monday, following a robust performance last week. Investors appear hesitant to make any significant moves ahead of several critical economic events slated for this week, which could greatly influence the outlook on interest rates.
Today's economic calendar kicks off slowly, but significant reports on June's consumer and producer prices are expected to gather attention in the upcoming days. The Labor Department's report on consumer prices is anticipated to indicate a deceleration in the annual price growth rate, fostering optimism for a possible rate cut in September.
Additionally, Federal Reserve Chair Jerome Powell's congressional testimony this week is likely to be closely monitored by traders for insights into future interest rate trends.
Last Friday saw stocks generally moving higher throughout the trading day, with the major indices all closing the session in positive territory after a mixed start. Both the Nasdaq and the S&P 500 closed higher for the fourth consecutive session, achieving new record closing highs yet again.
The major averages reached session highs just before the close of trading. Specifically, the Nasdaq surged 164.46 points, or 0.9%, to 18,352.76; the S&P 500 rose 30.17 points, or 0.5%, to 5,567.19; and the Dow increased by 67.87 points, or 0.2%, to 39,375.87.
Despite the influence of the holiday-shortened week, the Nasdaq spiked by 3.5%, the S&P 500 gained 2.0%, and the Dow advanced by 0.7%.
The positive sentiment on Wall Street was fueled by the Labor Department's closely followed monthly employment report for June, which generated optimism about the interest rate outlook. Although employment rose more than expected in June, the report also revealed downward revisions to job growth figures for April and May, plus an unexpected rise in the unemployment rate.
In June, non-farm payroll employment increased by 206,000 jobs, surpassing economist expectations of about 190,000 jobs. However, the employment growth figures for April and May were downwardly revised to 108,000 and 218,000 jobs, respectively, reflecting a net reduction of 111,000 jobs.
The unemployment rate climbed for the third consecutive month, reaching 4.1% in June, up from 4.0% in May, contrary to economists' expectations for an unchanged rate. The rate now stands at its highest level since November 2021.
Following the report, Treasury yields dipped amid optimism that the persistent rise in unemployment might prompt the Federal Reserve to lower interest rates soon.
"On net, the job market looks considerably cooler in the June report than in May, and the unemployment rate at 4.1% is above where the median Fed policymaker projected it at year-end when they compiled economic projections last month," said Bill Adams, Chief Economist at Comerica Bank.
"From the Fed's perspective, the labor market isn't soft enough to justify an interest rate cut at this month's meeting," he added. "But the labor market's cooling trend is quite clear. If inflation remains within its recent range, the Fed is likely to make an initial rate cut at the following decision in September."
Trading activity remained somewhat subdued, with some traders still away from their desks following Thursday's Independence Day holiday.
Gold stocks soared during the session, leading to a 2.6% increase in the NYSE Arca Gold Bugs Index, as the price of the precious metal reached its highest level in a month.
Significant strength was also observed among software stocks, with the Dow Jones U.S. Software Index posting a 1.4% gain. Pharmaceutical and retail stocks exhibited notable upward movements as well, with the NYSE Arca Pharmaceutical Index and the Dow Jones U.S. Retail Index rising by 1.3% and 1.1%, respectively.
Conversely, airline stocks faced a substantial downturn, dragging the NYSE Arca Airline Index down by 2.5%. Declines in crude oil prices negatively impacted energy stocks, and banking and steel stocks also experienced notable weaknesses on the day.
**Commodity, Currency Markets**
Crude oil futures are down by $0.53 to $82.63 a barrel, following a decline of $0.72 to $83.16 a barrel last Friday. Meanwhile, after rising by $28.30 to $2,397.70 an ounce in the previous session, gold futures have decreased by $14.90 to $2,382.80 an ounce.### Currency Market Update
The U.S. dollar is trading at 160.77 yen, slightly up from 160.75 yen at the close of New York trading on Friday. Against the euro, the dollar stands at $1.0839, virtually unchanged from last Friday's $1.0840.
### Asian Markets
Asian stocks fell on Monday amid a rise in the euro against the dollar, triggered by unprecedented political uncertainty following the French elections. A surprising victory by a leftist alliance resulted in a fragmented parliament with three major groups: left, center, and far right.
Investors are also eyeing upcoming U.S. and Chinese inflation figures and Federal Reserve Chair Jerome Powell's testimony this week for additional clues on the Fed's monetary policy direction. In Asian trading, oil and gold prices dipped, while the dollar hovered near three-week lows.
China’s Shanghai Composite Index dropped 0.9 percent to 2,922.45 as investors prepared for one of the nation’s significant annual policy meetings. Hong Kong’s Hang Seng Index fell 1.6 percent to 17,524.06 ahead of June's Chinese inflation data due on Wednesday.
Japanese markets retreated from record highs in volatile trading following data indicating a 26th consecutive month of declining real wages. The Nikkei 225 Index hit a record high of 41,112.24 before ending down 0.3 percent at 40,780.70. The Topix Index also fell 0.6 percent to 2867.61. Heavyweights SoftBank and Fast Retailing were up around 0.5 percent, while Yaskawa Electric led losses, plunging 4.4 percent.
Seoul stocks marginally declined, with the Kospi dipping 0.2 percent to 2,857.76 ahead of Jerome Powell's congressional testimony and June’s U.S. CPI data release. The Bank of Korea’s rate-setting meeting on Thursday also caught investors' attention. Samsung Biologics fell 1.4 percent, while Samsung Electronics and Hyundai Motor saw slight gains.
Australian markets experienced notable declines, especially among miners, as iron ore prices slumped due to concerns over Chinese demand and oversupply. The S&P/ASX 200 Index dropped 0.8 percent to 7,763.20, while the All Ordinaries Index fell 0.7 percent to 8,012.20. BHP, Rio Tinto, and Fortescue Metals Group lost 2-3 percent. Rex Minerals soared 56.4 percent after receiving a takeover bid from MACH Metals Australia. New Zealand's benchmark S&P/NZX-50 Index fell 0.4 percent to 11,745.53 ahead of the Reserve Bank of New Zealand's monetary policy review on Wednesday.
### European Markets
European stocks showed modest gains on Monday after a left-wing alliance won the most seats in the French parliament, thwarting the far right in a stunning second-round vote result. However, the lack of a majority has led to political chaos, undermining the president's power and affecting the EU's second-largest economy.
Germany saw its first decline in exports in three months, as demand from China and the U.S. weakened. Exports dropped 3.6 percent in May after a 1.7 percent increase in April, while imports fell by 6.6 percent, reversing a 1.2 percent rise.
The German DAX Index increased by 0.3 percent, the U.K.’s FTSE 100 Index edged up 0.2 percent, and France’s CAC 40 Index remained nearly unchanged.
Britvic surged after Carlsberg agreed to acquire the British soft drinks maker for £3.3 billion ($4.23 billion). Marston's shares also climbed after the company’s sale of its 40 percent stake in a brewing joint venture with Carlsberg. HgCapital Trust saw gains after agreeing to sell its remaining investment in business software company TeamSystem. Meanwhile, shares of Delivery Hero slumped due to potential antitrust fines exceeding €400 million from Brussels.
### U.S. Economic News
The Federal Reserve is set to release its consumer credit report for May at 3 PM ET. Economists expect consumer credit to have increased by $10.0 billion in May, following a $6.4 billion rise in April.
### Stocks to Watch
Shares of Morphic Holding (MORF) have soared in pre-market trading after the biopharmaceutical company agreed to be acquired by Eli Lilly (LLY) for $3.2 billion.Solar energy firm SolarEdge (SEDG) could experience an upward shift following an upgrade from Bank of America, which raised the stock's rating to "Neutral" from "Underperform." Conversely, ServiceNow (NOW) shares might face initial decline after Guggenheim adjusted its rating on the cloud computing company, downgrading it to "Sell" from "Neutral."
