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Futures Pointing To Continued Recovery From Last Week's Pullback

The major U.S. index futures are pointing to a higher open on Wednesday, with stocks poised to extend the rally seen over the course of the three previous sessions.

Continued strength on Wall Street would help the major averages further offset the sharp pullback seen last week, with the Nasdaq once again closing in on a new record high.

Traders have shrugged off the concerns about a second wave of coronavirus infections that contributed to last week's sell-off despite data showing a spike in new cases and hospitalizations in a number of southern states.

Instead, investors have focused on a recent batch of upbeat U.S. economic data, such as the substantial rebound in retail sales reported on Tuesday, which has reinforced optimism about a quick recovery.

The Trump administration has ruled out another lockdown, suggesting the economy will remain broadly open even in the face of a second wave of infections.

On the U.S. economic front, the Commerce Department released a report showing a notable rebound in new residential construction in May, although housing starts still came in well below economist estimates.

Around noon, Federal Reserve Chair Jerome Powell is scheduled to begin testifying before the House Financial Services Committee.

Powell's prepared remarks are likely to mirror those he delivered before the Senate Banking Committee on Tuesday, although traders will still keep an eye on the question-and-answer portion of his testimony.

After showing a substantial rebound over the course of Monday's session, stocks saw further upside during trading on Tuesday. With the upward move, the tech-heavy Nasdaq climbed back within striking distance of last week's record high.

The major averages finished the session firmly positive but off their best levels of the day. The Dow vaulted 526.82 points or 2 percent to 26,289.98, the Nasdaq jumped 160.84 points or 1.8 percent to 9,895.87 and the S&P 500 surged up 58.15 points or 1.9 percent to 3,124.74.

The continued strength on Wall Street came following the release of a report from the Commerce Department showing retail sales rebounded by much more than anticipated in the month of May, as stores began to reopen following the coronavirus lockdown.

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.

Sales by clothing and accessories stores showed a particularly sharp increase, catapulting by 188.0 percent in May following a 63.4 percent nosedive in the previous month.

Core retail sales, which exclude automobiles, gasoline, building materials and food services, also surged up by 11.0 percent in May after plunging by 12.4 percent in April.

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

Positive sentiment was also generated in reaction to 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.

Meanwhile, traders largely shrugged off a report from the Federal Reserve showing U.S. industrial production increased by much less than expected in the month of May.

The Fed said industrial production jumped by 1.4 percent in May after plummeting by a downwardly revised 12.5 percent in April.

Economists had expected industrial production to surge up by 2.9 percent compared to the 11.2 percent plunge originally reported for the previous month.

During congressional testimony, Fed Chair Jerome Powell acknowledged recent signs of improvement in the economy but cautioned that "significant uncertainty remains about the timing and strength of the recovery."

Networking stocks moved sharply higher amid the indications the Trump administration's infrastructure plan will include spending on 5G wireless and rural broadband, driving the NYSE Arca Networking Index up by 3.7 percent.

The report about the infrastructure plan also contributed to substantial strength among steel stocks, as reflected by the 3.5 percent spike by the NYSE Arca Steel Index.

Oil stocks also saw considerable strength on the day, moving higher along with the price of crude oil. The NYSE Arca Oil Index surged up by 3.2 percent.

Housing, pharmaceutical, and computer hardware stocks also moved significantly higher, reflecting broad based buying interest on Wall Street.

Meanwhile, gold stocks were among the few groups to buck the uptrend, with the NYSE Arca Gold Bugs Index slumping by 2.8 percent. The weakness in the sector came despite an increase by the price of gold.

Commodity, Currency Markets

Crude oil futures are slipping $0.31 to $38.07 a barrel after jumping $1.26 to $38.38 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,726, down $10.50 compared to the previous session's close of $1,736.50. On Tuesday, gold climbed $9.30.

On the currency front, the U.S. dollar is trading at 107.37 yen compared to the 107.32 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1241 compared to yesterday's $1.1264.

Asia

Asian stocks ended mixed in cautious trading on Wednesday as virus worries took center stage again and the International Monetary Fund indicated it is likely to further revise economic growth forecasts downwards in its upcoming outlook update.

Worries about rising tensions on the Korean peninsula and between India and China also kept underlying sentiment cautious.

Chinese shares ended little changed with a positive bias as officials ramped up efforts to contain a coronavirus outbreak in the capital that has fanned fears of wider contagion. The benchmark Shanghai Composite Index inched up 4.12 points, or 0.1 percent, to 2,935.87, while Hong Kong's Hang Seng Index climbed 137.32 points, or 0.6 percent, to 24,481.41.

Meanwhile, Japanese shares ended lower as concerns over a second wave of coronavirus infections returned and data showed the country's exports fell in May at the fastest pace since the 2009 global financial crisis.

Japan posted a merchandise trade deficit of 833.4 billion yen ($7.8 billion) in May, the second straight monthly trade deficit, as both exports and imports dropped sharply, a government showed.

Exports were down 28.3 percent year-on-year, badly missing expectations for a decline of 17.9 percent following the 21.9 percent drop in the previous month. Imports tumbled an annual 26.2 percent versus expectations for a fall of 15 percent after sinking 7.2 percent a month earlier.

The Nikkei 225 Index dropped 126.45 points, or 0.6 percent, to 22,455.76 after surging nearly 5 percent in the previous session on reports that the U.S. was preparing a sizable infrastructure proposal. The broader Topix closed 0.4 percent lower at 1,587.09.

Australian markets fluctuated before finishing modestly higher. The benchmark S&P/ASX 200 Index advanced 49.50 points, or 0.8 percent, to 5,991.80, while the broader All Ordinaries Index ended up 51.00 points, or 0.8 percent, at 6,109.20.

Woodside Petroleum, Santos and Origin Energy gained 1-2 percent after oil prices jumped more than 3 percent overnight.

Banks Commonwealth, NAB and Westpac rose between 0.3 percent and 0.7 percent, while mining heavyweights BHP and Rio Tinto dropped around 0.7 percent.

Infigen Energy shares soared 7.3 percent. The wind farm operator said it has received a rival takeover bid from Spanish utility Iberdrola that values it at A$835 million.

Carsales.com surged 6.2 percent after it reported improving customer activity following the easing of coronavirus restrictions.

In economic news, the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months in the future, confirmed the economy is in recession.

Seoul stocks edged up slightly despite escalating tensions with North Korea. The benchmark Kospi crept up 3.00 points, or 0.1 percent, to 2,141.05 despite North Korea threatening to bolster its military presence around the Demilitarized Zone.

Europe

European stocks have risen on Wednesday, extending gains from the previous session as hopes for a global economic recovery outweighed fears over a second wave of coronavirus infections as well as rising geopolitical tensions.

While the French CAC 40 Index has surged up by 1.4 percent, the German DAX Index and the U.K.'s FTSE 100 Index are up by 0.8 percent and 0.7 percent, respectively.

Dutch postal and parcel services provider PostNL has moved sharply higher after company said it expects second quarter normalized EBIT to come in strongly above last year.

Boohoo shares have also spiked. The online fashion group upgraded its profit forecasts after reporting a 45 percent jump in sales during the Covid-19 crisis.

Serco Group shares have also soared. The provider of public services reinstated financial guidance and said underlying trading profit for the first half would be about 50 percent higher based on strong revenue growth.

Construction firm Berkeley Group Holdings has also rallied after the company said it is well placed to manage the current period of uncertainty without calling on the government's furlough scheme or its Covid Corporate Financing Facility.

Delivery Hero SE has also advacned. The online food ordering company said it has reached a share purchase and equity collar agreement to restore its exposure in Just Eat Takeaway.com N.V. to about 10.6 percent.

On the data front, Eurozone inflation moved close to stagnation in May, as initially estimated, final data from Eurostat showed.

Inflation slowed to 0.1 percent from 0.3 percent in April. The rate came in line with the estimate published on May 29.This was the lowest since June 2016. In the same period last year, inflation was 1.2 percent.

On a monthly basis, the harmonized index of consumer prices dropped 0.1 percent in May. The monthly rate also matched preliminary estimate.

U.K. inflation eased to a four-year low in May, the Office for National Statistics said. Consumer price inflation eased to 0.5 percent in May, as expected, from 0.8 percent in April. This was the lowest since June 2016, when a similar 0.5 percent was reported.

On a monthly basis, consumer prices remained unchanged after easing 0.2 percent in April. Prices were expected to drop 0.1 percent.

U.S. Economic Reports

New residential construction in the U.S. showed a notable rebound in the month of May, according to a report released by the Commerce Department on Wednesday, although housing starts still came in well below economist estimates.

The report said housing starts jumped by 4.3 percent to an annual rate of 974,000 in May after plummeting by 26.4 percent to a revised rate of 934,000 in April.

Economists had expected housing starts to soar by 22.9 percent to a rate of 1.095 million from the 891,000 originally reported for the previous month.

Meanwhile, the Commerce Department said building permits spiked by 14.4 percent to an annual rate of 1.220 million in May after plunging by 21.4 percent to a revised rate of 1.066 million in April.

Building permits, an indicator of future housing demand, had been expected to surge up by 14.3 percent to a rate of 1.228 million from the 1.074 million originally reported for the previous month.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended June 12th.

Crude oil inventories are expected to edged up by 0.5 million barrels after jumping by 5.7 million barrels in the previous week.

Federal Reserve Chair Jerome Powell is scheduled to testify before the House Financial Services Committee beginning at 12 pm ET.

At 1 pm ET, the Treasury Department is due to announce the results of its auction of $17 billion worth of twenty-year bonds.

Stocks In Focus

Shares of Groupon (GRPN) are moving significantly higher in pre-market trading after the local experiences marketplace reported a narrower than expected fiscal first quarter loss on revenues that exceeded analyst estimates.

Electric truck maker Nikola (NKLA) is also likely to see initial strength after Cowen initiated coverage of the company's stock with an Outperform rating.

On the other hand, shares of Norwegian Cruise Lines (NCLH) may come under pressure after the cruise operator extended its temporary suspension of voyages through September 30. The company is also cancelling select voyages through October.

Business software giant Oracle (ORCL) may also move to the downside after reporting fiscal fourth quarter earnings that beat analyst estimates but on weaker than expected revenues.

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