With traders digesting the recent strength in the markets, stocks may show a lack of direction in early trading on Monday. The major index futures are currently pointing to a roughly flat open for the markets, with the Dow futures down by just 10 points.
Uncertainty about the near-term outlook for the markets may contribute to a lackluster performance on Wall Street, with a light day on the U.S. economic calendar also likely to keep some traders on the sidelines.
Benefiting from optimism about the possibility of further monetary stimulus, stocks have trended higher over the course of the past two months. The upward move has lifted the major averages to three-month highs, with the Nasdaq and the S&P 500 climbing above 3,000 and 1,400, respectively.
However, buying interest has waned over the past few sessions, and traders may need to see an official stimulus announcement before making any significant moves.
Trading on Monday could be impacted by the release of a report from Japan's Cabinet Office showing weaker than expected Japanese economic growth in the second quarter.
The report showed that Japanese GDP rose by 0.3 percent sequentially in the second quarter. The increase was tame compared to the 0.6 percent growth expected by economists. Annually, GDP rose 1.4 percent, while economists had expected a sharper 2.5 percent increase.
While the report may add to concerns about the outlook for the global economy, it may also add to the optimism about further stimulus.
David Rea, Japan Economist at Capital Economics, said, "Fiscal policy is in no shape to provide additional stimulus, increasing the pressure on the Bank of Japan to further augment its asset purchase program."
"We expect the Bank will extend the program again at least once more this year, probably in October when it publishes its semi-annual report on economic activity and prices," he added.
After moving moderately lower in early trading on Friday, stocks turned higher over the course of the trading day. The markets benefited from continued optimism about the possibility of additional monetary stimulus from the world's central banks.
The major averages climbed above the unchanged line in late trading, ending the session modestly higher. The Dow edged up 42.76 points or 0.3 percent to 13,207.95, the Nasdaq inched up 2.22 points or 0.1 percent to 3,020.86 and the S&P 500 inched up 3.07 points or 0.2 percent to 1,405.87.
For the week, the Dow Industrials rose 0.9 percent and the S&P 500 Index added 1.1 percent, while the Nasdaq rallied 1.8 percent.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Monday. While Japan's Nikkei 225 Index edged down by 0.1 percent, Australia's All Ordinaries Index crept up by 0.2 percent.
The major European markets have also turned mixed on the day. The U.K.'s FTSE 100 Index has slipped by 0.2 percent, while the German DAX Index and the French CAC 40 Index have both inched up by 0.1 percent.
In commodities trading, crude oil futures are climbing $0.79 to $93.66 a barrel after advancing $1.47 or 1.6 percent to $92.87 a barrel in the week ended August 10th. Gold futures, which rose $13.50 or 0.8 percent to $1,622.80 an ounce last week, are edging up $1.10 to $1,623.90 an ounce.
On the currency front, the U.S. dollar edged down 0.2 percent against the yen last week to 78.27 yen. Meanwhile, the greenback rose 0.8 percent against the euro to $1.2290. The dollar is currently trading at 78.34 yen and is valued at $1.2355 versus the euro.
by RTT Staff Writer
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