Overbought Markets Could See Tentativeness Amid Lack Of Catalysts

(RTTNews) - The major U.S. index futures are pointing to a lower opening on Monday, with sentiment reflecting nervousness as the markets trade at overbought levels. With no major economic and corporate news to guide trading, a lack of direction may be visible for much of the session, although some strength could materialize based on strong data points from China and Japan.

U.S. stocks extended their gains in the week ended June 6th, with the Dow Industrials and S&P 500 Index setting record closing highs amid positive domestic economic data and the European Central Bank's monetary policy action.

Last Monday, the major averages experienced some volatility due to the release of erroneous manufacturing readings by the Institute for Supply Management. With the corrected reading nearly matching estimates, the averages recouped most of their losses before ending mixed. The major averages went about in a lackluster fashion on Tuesday amid a lack of any major catalysts and ended modestly lower.

Helped by a positive domestic service sector reading, the major averages rebounded modestly on Wednesday. The upward momentum strengthened on Thursday, thanks to new measures announced by the European Central Bank to reinvigorate growth in the euro zone. With the monthly non-farm payrolls report coming in line with expectations, the averages extended their gains on Friday.

For the week ended June 6th, the Dow Industrials and the S&P 500 Index rose 1.24 percent and 1.34 percent, respectively, while the Nasal Composite Index added 1.86 percent.

Among the sector indexes, the NYSE Arca Airline Index rallied 3.96 percent, and the NYSE Arca Biotechnology Index, the Philadelphia Semiconductor Index and the NYSE Arca Broker/Dealer Index all gained close to 3 percent. Additionally, the Philadelphia Housing Sector Index and the KBW Bank Index gained over 2 percent each.

Commodity, Currency Markets

Crude oil futures are climbing $0.78 to $103.44 a barrel on Monday after slipping $0.05 to $102.66 a barrel in the week ended June 6th.

Last Monday, crude oil eased modestly amid the confusion over the Institute for Supply Management's manufacturing reading.

Oil edged up marginally on Tuesday before ending Wednesday's trading nearly flat amid the release of the weekly oil inventory report. The commodity fell modestly on Thursday only to rebound on Friday in reaction to the U.S. jobs data.

Gold futures, which rose $6.50 or 0.52 percent to $1,252.50 an ounce last week, are currently rising $2.60 to $1,255.10 an ounce.

Among currencies, the U.S. dollar was mixed in the week ended June 6th. The dollar advanced 0.70 percent against the yen before ending the week at 102.48 yen. At the same time, the greenback eased 0.05 percent against the euro, as the euro recovered following the ECB's monetary policy moves. This was countered by the dollar's strength in the wake of some solid U.S. economic data.

The U.S. dollar is currently trading at 102.45 yen and is valued at $1.3607 versus the euro.

Asia

Most Asian markets moved to the upside, with some positive economic data from the region lending support. China reported strong trade data, Japanese first quarter GDP was upwardly revised and last Friday's U.S. jobs data was robust - three reasons that served to generate positive sentiment. The Australian market was closed for a public holiday.

The Japanese market benefited from the yen's weakness following the increase in risk appetite. The Nikkei 225 average opened higher and held above the unchanged line throughout the session, ending up 46.76 points or 0.31 percent at 15,124. Export stocks gained ground in the session, but resource, utility, real estate and financial stocks came under selling pressure.

Hong Kong's Hang Sang Index ended at 23,118, up 166.47 points or 0.73 percent, and China's Shanghai Composite Index added 0.55 points or 0.03 percent before closing at 2,031. Meanwhile, South Korea's Kopi retreated modestly.

On the economic front, a report released by China's General Administration of Customs showed that exports rose 7 percent year-over-year in May, accelerating from the 0.9 percent growth rate in April. Imports fell 1.6 percent, sending the trade surplus to $35.9 billion from $18.5 billion in April.

Second estimates released by Japan's Cabinet Office showed that the nation's GDP rose 1.6 percent in the first quarter, faster than the 1.5 percent growth estimated initially and the consensus estimate of 1.4 percent growth. This followed a 0.1 percent rise in the fourth quarter and marked the fastest growth since the 2.6 percent increase in the third quarter of 2011.

The trade balance report released by Japan's Ministry of Finance showed that the deficit on trade in goods widened in April. The goods trade deficit widened to 780.4 billion yen in April from 708.2 billion yen in the year-ago period. The current account surplus was at 187.4 billion yen, less than the 287.7 billion yen surplus estimated by economists and the 784.4 billion surplus recorded for April last year.

Meanwhile, the Bank of Japan said total bank lending rose 2.3 percent year-over-year in May following 2.1 increases in both April and March. Excluding trusts, lending by major and regional banks, rose 2.4 percent, faster than the 2.2 percent increase in April.

The results of a survey by Japan's Cabinet Office showed that consumer confidence in Japan improved in May, with the index coming in at 39.3 compared to 37 in April. Economists expected a more modest improvement to 37.6.

Europe

European stocks are showing some volatility in early trading and are currently mixed amid light data and earnings news flow.

In corporate news, O.K. Lloyds announced that it has priced its offering of TSB Banking Group at 2.20 pounds to 2.90 pounds, considered by some analysts as below-par.

U.S. Economic Reports

The unfolding week's economic calendar is light, with only a few reports scheduled for the week having the potential to move the markets. Traders may closely watch the Commerce Department's retail sales report for May, the jobless claims report and the preliminary reading on consumer sentiment in June by Reuters and the University of Michigan. The markets may also show interest in a few Fed speeches scheduled for the week.

The Commerce Department's wholesale and business inventories reports for April, the Treasury Budget for May, a Labor Department report on import and export prices report for May, a separate report on May producer price inflation for final goods and the results of the Treasury auctions of 3-year and 10-year notes and 30-year bonds round up the economic events of the week.

St Louis Fed President James Bullard is scheduled to speak on the economy and monetary policy in Palm Beach, Florida at 9:10 am ET, while Fed Governor Daniel Trollop will speak on corporate governance in Washington at 12:45 pm ET.

Additionally, Boston Fed President Eric Roentgen is due to speak on monetary policy at a Bank of Guatemala conference in Guatemala City at 1:30 pm ET.

Stocks in Focus

McDonald's (MCD) reported comparable store sales growth of 0.9 percent year-over-year in May, with sales rising 0.9 percent.

American Airlines (AAL) reported a 2.1 percent year-over-year increase in its load factor for May, with capacity and traffic improving 2.4 percent and 2.1 percent. Southwest Airlines (LUV) also reported higher load fact for May.

Reports suggest that Tyson Foods (TSN) may have won the battle to acquire Hillshire Brands (HSH) for about $63 per share in cash, topping Pilgrim's Pride (PPC) in the bidding war.

Jos. A. Bank Clothiers (JOSB), which is to be acquired by Men's Warehouse (MW), reported first quarter adjusted earnings of 32 cents per share on revenues of $217.422 million, up from the year-ago quarter's $196.055 million.

Family Dollar (FDO) announced that it has taken note of a Schedule 13D filing by billionaire investor Carl Icahn, which showed that Icahn has acquired a 9.4 percent stake in the discount store.

Bygone Idec (BIIB) announced that the U.S. FDA has approved its Eloctate, the first hemophilia A therapy to extend the interval between prophylactic infusions for both adults and children.