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Traders May Show Caution Following Yesterday's Rally

The major U.S. index futures are currently pointing to a mixed open on Tuesday, with stocks likely to show a lack of direction following the rally seen in the previous session.

Uncertainty about the near-term outlook for the markets may keep traders on the sidelines after yesterday's rally lifted the Nasdaq and the S&P 500 to their best closing levels in well over two months.

Traders have recently expressed considerable optimism about the economy reopening, although lingering concerns about the coronavirus pandemic may lead to some caution.

Reaction to Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin's testimony before the Senate Banking Committee may also drive early trading on Wall Street.

Powell's prepared remarks largely focus on the actions the Fed has already taken, which may lead traders to pay closer attention to the question-and-answer portion of his testimony.

Traders are also digesting the latest earnings news, with shares of Walmart (WMT) moving notably higher in pre-market trading after the retail giant reported better than expected first quarter results.

Following the sharp pullback seen last week, stocks moved significantly higher over the course of the trading session on Monday. The major averages all showed strong moves to the upside on the day.

The major averages pulled back off their highs going into the close but remained firmly positive. The Dow soared 911.95 points or 3.9 percent to 24,597.37, the Nasdaq surged up 220.27 points or 2.4 percent to 9,234.83 and the S&P 500 jumped 90.21 points or 3.2 percent to 2,953.91.

The rally on Wall Street came after Moderna (MRNA) reported "positive" phase one results for a potential coronavirus vaccine.

Shares of Moderna spiked by 20 percent after the biotechnology company said an early-stage human trial for a vaccine produced antibodies in all 45 participants.

Energy stocks also saw substantial strength on the day, benefiting from a sharp increase by the price of crude oil. Crude for June delivery skyrocketed $2.39 to $31.82 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 12.5 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index jumped by 8.5 percent and 8 percent, respectively.

Significant strength was also visible among housing stocks, as reflected by the 9 percent spike by the Philadelphia Housing Sector Index.

Steel, banking and transportation stocks also saw considerable strength on the day, moving sharply higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are climbing $0.71 to $32.53 a barrel after spiking $2.39 to $31.82 a barrel on Monday. Meanwhile, after tumbling $21.90 to $1,734.40 an ounce in the previous session, gold futures are inching up $1 to $1,735.40 an ounce.

On the currency front, the U.S. dollar is trading at 107.90 yen compared to the 107.34 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0949 compared to yesterday's $1.0913.

Asia

Asian stocks rose on Tuesday as investors cheered "positive" phase one results for a potential coronavirus vaccine and hoped that the reopening of business across the world will aid an economic recovery.

Chinese shares rose after data from Moderna Inc.'s COVID-19 vaccine, the first to be tested in the United States, showed it produced protective antibodies in a small group of healthy volunteers.

The benchmark Shanghai Composite Index climbed 23.16 points, or 0.8 percent, to 2,898.58, while Hong Kong's Hang Seng Index surged up 453.36 points, or 1.9 percent, to 24,388.13.

Japanese shares hit a 2-1/2 month high on hopes for a swift return to normal as some facilities begin reopening from the coronavirus crisis. Encouraging early-stage data for a potential coronavirus vaccine also bolstered sentiment.

The Nikkei 225 Index rallied 299.72 points, or 1.5 percent, to 20,433.45, its highest closing since March 6. The broader Topix closed 1.8 percent higher at 1,486.05.

Highly cyclical iron and steel, sea transport and insurance stocks were among the top performers. Panasonic Corp. shares surged 7 percent after the company said it was seeing strong demand for battery cells from U.S. partner Tesla Inc.

Banks Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group rose over 4 percent each.

Sony Corp. advanced 3.3 percent and its financial arm Sony Financial Holdings soared 16.9 percent on a Nikkei report that Sony will turn Sony Financial into a wholly-owned unit through a tender offer worth about 400 billion yen ($3.7 billion).

Investors shrugged off weak data showing that Japanese industrial production declined in March as initially estimated. Industrial production fell a seasonally adjusted 3.7 percent month-on-month in March. On a yearly basis, industrial production declined 5.2 percent in March, as estimated.

Australian markets reached their highest level in over two months on news of a potential vaccine for the coronavirus and hopes for a U.S. economic recovery in the second half of the year.

The benchmark S&P/ASX 200 Index jumped 99.00 points, or 1.8 percent, to 5,559.50, while the broader All Ordinaries Index ended up 101.30 points, or 1.8 percent, at 5,658.80.

Energy companies such as Woodside Petroleum, Santos, Beach Energy and Oil Search soared 4-7 percent as crude prices surged to two-month highs on growing signs of a rebound in oil demand.

Miners BHP, Fortescue Metals Group and Rio Tinto jumped 5-6 percent amid indications that China's iron ore port inventories are gradually eroding.

The big four banks rose 1-2 percent after minutes from the Reserve Bank of Australia's May 5 meeting revealed that the board would maintain its efforts to support the economy by keeping funding costs low and credit available to households and businesses.

Tabcorp Holdings advanced 2.5 percent. The betting and gaming giant said it has arranged more financing with banks to boost liquidity.

Seoul stocks rose sharply on growing hopes of a COVID-19 vaccine. The benchmark Kospi spiked 43.50 points, or 2.3 percent, to close at 1,980.61, extending its winning streak to a third day.

Market heavyweight Samsung Electronics climbed 3.1 percent and No. 2 chipmaker SK Hynix gained 2 percent, while automakers Hyundai Motor and Kia Motors soared around 8 percent.

Europe

European stocks have fallen in cautious trading on Tuesday as investors fret about renewed U.S.-China tensions and a gloomy economic outlook.

The downside, however, was limited after Germany and France joined forces to push for a €500 billion EU recovery fund that would offer grants to European Union regions and sectors hit hardest by the pandemic.

While the German DAX Index has edged down by 0.1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index are down by 0.5 percent and 0.6 percent, respectively.

French spirits company Remy Cointreau has moved sharply lower after Goldman Sachs downgraded its shares to "neutral" from "buy".

Automakers are also declining after industry data showed Europe's car registrations declined at the fastest pace since records began in April amid the COVID-19 pandemic.

Passenger car sales plunged 76.3 percent year-on-year in April following a 55.1 percent slump in March, the European Automobile Manufacturers Association said. In the first full month of COVID-19 restrictions, car demand posted its biggest fall on record.

Meanwhile, shares of Julius Baer Group have jumped in Switzerland after a spike in trading volumes boosted margins for the wealth manger in the first four months of fiscal 2020.

German industrial company Thyssenkrupp AG has also risen after saying it was looking for partners for its steel and warship divisions.

In economic news, German economic confidence improved notably in May, survey data from the ZEW - Leibniz Centre for European Economic Research showed. The ZEW Indicator of Economic Sentiment rose 22.8 points to 51.0 in May. The expected reading was 32.0.

The U.K. unemployment rate rose only marginally in the first quarter, data from the Office for National Statistics showed. The ILO jobless rate came in at 3.9 percent, well below economists' forecast of 4.4 percent.

The ONS said the unemployment rate was 0.1 percentage points higher than a year earlier and 0.1 percentage points higher than the previous quarter.

U.S. Economic Reports

Reflecting the impact of the coronavirus-induced economic shutdown, the Commerce Department released a report on Tuesday showing another steep drop in new residential construction in the U.S. in the month of April.

The report said housing starts plummeted by 30.2 percent to an annual rate of 891,000 in April after tumbling by 18.6 percent to a revised 1.276 million in March.

Economists had expected housing stocks to plunge by 23.8 percent to a rate of 927,000 from the 1.216 million originally reported for the previous month.

The Commerce Department said building permits also slumped by 20.8 percent to an annual rate of 1.074 million in April after falling by 5.7 percent to a revised 1.356 million in March.

Building permits, an indicator of future housing demand, had been expected to nosedive by 26.1 percent to a rate of 1 million from the 1.353 million originally reported for the previous month.

At 10 am ET, Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin are due to testify before the Senate Banking Committee in a "Quarterly CARES Act Report to Congress."

Boston Fed President Eric Rosengren is scheduled to speak in a virtual talk hosted by the New England Council on the impact of the COVID-19 public health crisis on the New England economy at 2 pm ET.

Stocks In Focus

Shares of Advance Auto Parts (AAP) are moving sharply higher in pre-market trading after the auto parts retailer reported weaker than expected first quarter results but provided upbeat guidance.

Chinese search engine giant Baidu (BIDU) is also likely to see initial strength after reporting first quarter results that exceeded analyst estimates.

On the other hand, shares of Home Depot (HD) may move to the downside after the home improvement retailer reported weaker than expected first quarter earnings.

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