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Report Of Infrastructure Plan, Retail Sales Data Likely To Generate Early Buying Interest

The major U.S. index futures are currently pointing to a sharply higher open on Tuesday, with stocks likely to see further upside following the substantial rebound seen over the course of the previous session.

The upward momentum has been attributed to a report from Bloomberg indicating the Trump administration is preparing a nearly $1 trillion infrastructure proposal as part of an effort to support the economy following the coronavirus pandemic.

People familiar with the plan told Bloomberg a preliminary version would reserve most of the money for traditional infrastructure work, like roads and bridges, but would also set aside funds for 5G wireless infrastructure and rural broadband.

Bloomberg noted President Donald Trump is scheduled to discuss rural broadband access at a White House event on Thursday.

The people familiar with the plan told Bloomberg the administration sees an existing infrastructure funding law that is up for renewal by September 30 as a possible vehicle for the broader package.

Positive sentiment may also be generated in reaction to a report from the Commerce Department showing U.S. retail sales rebounded by much more than anticipated in the month of May.

On the heels of the much better than expected jobs report released earlier this month, the data is likely to reinforce optimism about a quick economic recovery.

Stocks showed a substantial turnaround over the course of the trading session on Monday after moving sharply lower at the open. The major averages all climbed well off their early lows and firmly in positive territory.

The major averages fluctuated going into the close but held on to notable gains. The Dow rose 157.62 points or 0.6 percent to 25,763.16, the Nasdaq surged up 137.21 points or 1.4 percent to 9,726.02 and the S&P 500 climbed 25.28 points or 0.8 percent at 3,066.59.

The initial weakness on Wall Street came amid concerns about a second wave of coronavirus infections after Beijing recorded a spate of new Covid-19 cases in a major wholesale food market.

Data compiled by the New York Times also showed a recent increase in coronavirus cases in more than 20 states, including California, Florida, and Nevada.

Texas and North Carolina also reported a record number of coronavirus-related hospitalizations on Saturday, adding to worries that businesses reopening may drive a second wave.

Selling pressure waned over the course of the morning, however, as traders continued to express optimism about the economy as the New York Federal Reserve released a report showing regional manufacturing activity steadied in June after seeing sharp contractions in April and May.

The New York Fed said its general business conditions index spiked to negative 0.2 in June from negative 48.5 in May. A negative reading indicates a contraction in regional manufacturing activity.

The jump by the index far exceeded the estimates of economists, who had expected the index to surge up to negative 27.5.

Stocks turned positive after the Federal Reserve announced plans to begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers.

The Fed said it will buy up to $750 million worth of corporate bonds to create a corporate bond portfolio that is based on a broad, diversified market index of U.S. corporate bonds.

The index will be made up of all the bonds in the secondary market that have been issued by U.S. companies that satisfy the facility's minimum rating, maximum maturity, and other criteria.

Housing stocks moved sharply higher over the course of the trading session, driving the Philadelphia Housing Sector Index up by 3.2 percent.

Substantial strength was also visible among tobacco stocks, as reflected by the 2.7 percent jump by the NYSE Arca Tobacco Index.

Gold stocks also showed a significant move to the upside, with the NYSE Arca Gold Bugs Index surging up by 2.5 percent. The rally by gold stocks came despite a decrease by the price of the precious metal.

Natural gas, banking and semiconductor stocks also saw notable strength on the day, contributing to the turnaround by the broader markets.

Commodity, Currency Markets

Crude oil futures are jumping $1.20 to $38.32 a barrel after climbing $0.86 to $37.12 a barrel on Monday. Meanwhile, after slumping $10.10 to $1,727.20 an ounce in the previous session, gold futures are rising $4.80 to $1,732 an ounce.

On the currency front, the U.S. dollar is trading at 107.37 yen compared to the 107.33 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1297 compared to yesterday's $1.1323.

Asia

Asian stocks soared on Tuesday after the U.S. Federal Reserve outlined plans to buy individual corporate bonds to help prop up the economy amid the coronavirus pandemic.

Chinese shares rose even as Beijing entered "wartime mode" in response to a troubling new cluster of coronavirus infections. The benchmark Shanghai Composite Index jumped 41.72 points, or 1.4 percent, to finish at 2,931.75, while Hong Kong's Hang Seng Index rallied 567.14 points, or 2.4 percent, to 24,344.09.

Japanese shares also moved sharply higher amid hopes for a multi-million dollar infrastructure plan in the U.S. The Nikkei 225 Index soared 1,051.26 points, or 4.9 percent, to 22,582.21, while the broader Topix index closed 4.1 percent higher at 1,593.45.

Market heavyweight SoftBank Group advanced 2.8 percent and Fast Retailing added 3.6 percent. Exporters Canon, Panasonic, Toyota Motor and Honda Motor climbed 4-8 percent as the yen declined slightly after the Bank of Japan's interest rate decision.

After keeping its monetary policy settings steady, the Bank of Japan increased the nominal size of its lending packages for cash-strapped firms to $1 trillion from about $700 billion announced last month.

Australian markets soared to snap a three-day losing streak on improved risk appetite after the Fed expanded the scope of its bond-buying program.

The benchmark S&P/ASX 200 Index spiked 222.50 points, or 3.9 percent, to 5,942.30, while the broader All Ordinaries Index surged up 228.10 points, or 3.9 percent, to 6,058.10.

Energy companies such as Woodside Petroleum and Santos gained 4-5 percent after oil prices rose more than 2 percent overnight. Origin Energy surged 6.5 percent and Oil Search soared 8.6 percent.

Viva Energy shares skyrocketed 15.5 percent after the refiner forecast a better than expected first-half core profit.

Miners BHP, Rio Tinto and Fortescue Metals Group surged 3-4 percent, while the big four banks all rose over 4 percent. Super Retail Group jumped nearly 10 percent after completing a $203 million equity raising.

In economic news, minutes from the Reserve Bank of Australia's June 2 meeting revealed that the stimulus the bank has put in place to combat the Covid-19 pandemic will remain for an extended period of time.

A government report showed that house prices in Australia were up 1.6 percent sequentially in the first quarter of 2020. That was shy of expectations for an increase of 2.7 percent following the 3.9 percent gain in the three months prior.

Seoul stocks posted strong gains despite North Korea's military threatening to send back troops that it had withdrawn from areas near the South Korean border. The benchmark Kospi surged 107.23 points, or 5.3 percent, to 2,138.05.

Europe

European stocks have rallied on Tuesday after the U.S. Federal Reserve outlined plans to buy individual corporate bonds to help prop up the economy amid the coronavirus pandemic.

Worries about a second wave of coronavirus infections also eased as mainland China reported 40 new confirmed coronavirus cases for June 15, down from 49 a day earlier.

Investors also cheered reports suggesting that the Trump administration is weighing a $1 trillion infrastructure plan to spur on the economy in the wake of the coronavirus crisis.

Earlier today, the Bank of Japan increased the nominal size of its lending packages for cash-strapped firms to $1 trillion from about $700 billion announced last month.

While the German DAX Index has spiked by 3.8 percent, the U.K.'s FTSE 100 Index is up by 3.6 percent and the French CAC 40 Index is up by 3.4 percent.

Airbus has advanced after budget airline easyJet said it would take delivery of 24 Airbus planes between 2025 and 2027. easyJet shares have also surged.

Shares of TUI Group have soared after the tour operator announced its plans to partially restart its Summer 2020 program amid the easing of travel restrictions in Europe.

Deutsche Telekom shares have also risen after SoftBank Group Corp. said it would explore potential transactions of T-Mobile US Inc. shares.

Deutsche Lufthansa has also moved to the upside. The airline operator said it is seeking to reach agreements with the representatives of the trade unions by June 22 to cut 22,000 full-time jobs.

Smith & Nephew has also moved higher. The medical equipment manufacturer said its REGENETEN Bioinductive Implant has received CE Mark certification.

Industrial equipment rental company Ashtead Group has also jumped. The company maintained its dividend despite reporting a sharp drop in its fourth-quarter profit.

Cineworld Group shares have also advanced. The cinema operator plans to reopen cinemas across some territories during the last week of June, with all theatres expected to be open over the course of July.

Meanwhile, online fashion retailer Zalando has moved sharply lower after a stake sale by Swedish investment firm Kinnevik AB.

In economic news, German investor sentiment rose more than expected in June on hopes that the economy will bottom out by summer 2020, a survey showed.

The ZEW research institute's economic sentiment index rose to 63.4 from 51.0 in May. Economists had expected a reading of 60.0.

The U.K. jobless rate was unchanged from the previous quarter, while earnings growth slowed sharply in the three months to April, when the economy entered a lockdown for a large part to slow the spread of the coronavirus, preliminary data from the Office for National Statistics showed.

U.S. Economic Reports

After reporting a record drop in U.S. retail sales in the previous month, the Commerce Department released a report on Tuesday showing retail sales rebounded by much more than anticipated in the month of May.

The Commerce Department said retail sales skyrocketed by 17.7 percent in May after plunging by a revised 14.7 percent in April.

Economists had expected retail sales to spike by 8.0 percent compared to the 16.4 percent nosedive originally reported for the previous month.

The record increase in retail sales was partly due to a substantial rebound in sales by motor vehicle and parts dealers, which soared by 44.1 percent in May after tumbling by 12.3 percent in April.

Excluding the rebound in auto sales, however, retail sales still surged up by 12.4 percent in May after plummeting by 15.2 percent in April. Ex-auto sales were expected to jump by 5.5 percent.

The Federal Reserve is scheduled to release its report on industrial production in the month of May at 9:15 am ET. Industrial production is expected to jump by 2.9 percent in May after plunging by 11.2 percent in April.

At 10 am ET, the National Association of Home Builders is due to release its report on homebuilder confidence in the month of June at 10 am ET. Economists expect the housing market index to rise to 45 in June from 37 in May.

Fed Chair Jerome Powell is also scheduled to begin his testimony before the Senate Banking Committee at about 10 am ET.

Also at 10 am ET, the Commerce Department is due to release its report on business inventories in the month of April. Inventories are expected to decrease by 0.8 percent.

Fed Vice Chairman Richard Clarida is scheduled to speak at the Foreign Policy Association Annual Dinner in a pre-recorded video on the U.S. economic outlook and monetary policy at 6 pm ET.

Stocks In Focus

Shares of WW International (WW) are moving sharply higher in pre-market trading after the Weight Watches parent reported a 7 percent year-over-year increase in subscribers as of June 6, reflecting a jump in digital subscribership.

Drug maker Eli Lilly (LLY) is also likely to see initial strength after reporting promising data from a late-stage study of its experimental breast cancer treatment Verzenio.

Shares of Tanger (SKT) may also move to the upside after the shopping center operator said open stores as a percentage of total occupied stores are approaching 90 percent and weekly traffic at centers where in-store retail has been allowed for 30 days or more exceeds 90 percent of prior year levels.

On the other hand, shares of Chesapeake Energy (CHK) may come under pressure after a report from Reuters said the energy producer is preparing to file for bankruptcy protection as soon as this week.

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