Market Analysis

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to give back ground after ending the previous session notably higher.

Profit taking may contribute to initial weakness on Wall Street after the strength seen in the previous session lifted the Dow and the S&P 500 to new record closing highs.

The advance seen on Monday came amid more upbeat news regarding a potential coronavirus vaccine, although a continued spike in cases may weigh on the markets.

Data from John Hopkins University showed more than 133,000 news coronavirus cases on Monday, with the total number of cases in the U.S. now exceeding 11 million.

Negative sentiment may also be generated in reaction to a report from the Commerce Department showing retail sales rose by less than expected in the month of October.

Stocks moved mostly higher over the course of the trading day on Monday following the mixed performance seen last week. With the upward move on the day, the Dow and the S&P 500 ended the session at new record closing highs.

The major averages all finished the day firmly in positive territory. The Dow surged up 470.63 points or 1.6 percent to 29,950.44, the Nasdaq climbed 94.84 points or 0.8 percent to 11,924.13 and the S&P 500 jumped 41.76 points or 1.2 percent to 3,626.92.

The strength on Wall Street came following more upbeat news on the coronavirus vaccine front, with Moderna (MRNA) reporting positive results from a trial of its vaccine candidate.

Moderna said that the trial of its potential coronavirus vaccine has met the statistical criteria pre-specified in the study protocol for efficacy, with a vaccine efficacy of 94.5 percent.

"This is a pivotal moment in the development of our COVID-19 vaccine candidate. Since early January, we have chased this virus with the intent to protect as many people around the world as possible," said Stéphane Bancel, Chief Executive Officer of Moderna.

He added, "All along, we have known that each day matters. This positive interim analysis from our Phase 3 study has given us the first clinical validation that our vaccine can prevent COVID-19 disease, including severe disease."

On the U.S. economic front, a report released by the Federal Reserve Bank of New York showed New York manufacturing activity unexpectedly expanded at a slower rate in the month of November.

The New York Fed said its general business conditions index fell to 6.3 in November from 10.5 in October. While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to rise to 13.5.

Looking ahead, the index for future business conditions held steady at 33.9, suggesting that firms remained optimistic about future conditions.

Energy stocks turned in some of the market's best performances on the day, benefiting from a sharp increase by the price of crude oil. Crude for December delivery jumped $1.21 to $41.34 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index skyrocketed by 8.9 percent and the NYSE Arca Oil Index soared by 6.6 percent.

Considerable strength was also visible among airline stocks, as reflected by the 5.7 percent spike by the NYSE Arca Airline Index. The index ended the session at its best closing level in five months.

Steel stocks also showed a substantial move to the upside on the day, driving the NYSE Arca Steel Index up by 4 percent to a nearly ten-month closing high.

Banking, computer hardware and transportation stocks also saw significant strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are sliding $0.70 to $40.64 a barrel after jumping $1.21 to $41.34 a barrel on Monday. Meanwhile, after inching up $1.60 to $1,887.80 an ounce in the previous session, gold futures are edging down $0.40 to $1,887.40 an ounce.

On the currency front, the U.S. dollar is trading at 104.09 yen compared to the 104.58 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1890 compared to yesterday’s $1.1852.

Asia

Asian stocks ended a choppy session mixed on Tuesday as optimism over Moderna's experimental Covid-19 vaccine was offset by worries about the continued surge in coronavirus cases worldwide.

Chinese shares ended a tad lower, with the benchmark Shanghai Composite Index ending down 7.07 points, or 0.2 percent, at 3,339.90. Hong Kong's Hang Seng Index finished 0.1 percent higher at 26,415.09.

Japanese shares hit a fresh 29-year high as another promising Covid-19 vaccine development revived hopes of a swift global recovery. The Nikkei 225 Index rose 107.69 points, or 0.4 percent, to 26,014.62, its highest close since May 1991. The broader Topix closed 0.2 percent higher at 1,734.66.

Travel-related stocks led the surge, with ANA Holdings and Japan Airlines rising 4.2 percent and 3.7 percent, respectively. In the tech space, Tokyo Electron rose 1.3 percent to a record high.

Australian markets ended modestly higher as trading on the exchange resumed without incident after a tech glitch in the previous session.

The benchmark S&P/ASX 200 Index edged up 13.90 points, or 0.2 percent, to 6,498.20, while the broader All Ordinaries Index ended up 10.80 points, or 0.2 percent, at 6,697.80.

Beach Energy, Oil Search, Woodside Petroleum and Santos jumped 3-6 percent after crude oil prices surged overnight. BHP advanced 1.4 percent and Rio Tinto added 1 percent after solid Chinese factory activity data lifted iron ore prices.

The big four banks rose 1-3 percent. Gold miners Evolution Mining, Newcrest and Northern Star Resources fell 3-5 percent.

In economic news, minutes from the Reserve Bank of Australia's November meeting revealed that members believe the country's economic recovery from the Covid-19 pandemic was well underway but would be protracted.

Australia is likely to see an extended period of higher unemployment due to the pandemic, Reserve Bank of Australia Governor Philip Lowe said Monday, adding that addressing higher unemployment is an important national priority.

Seoul stocks fell on profit taking after hitting a nearly three-year high the previous day. The benchmark Kospi ended a choppy session down 3.88 points, or 0.2 percent, at 2,539.15.

Tech stocks ended on a subdued note, while auto and battery-related stocks rose on massive foreign buying. Korean Air Lines plunged 8.9 percent after its announcement of plans to take over smaller rival Asiana Airlines.

Europe

European stocks have pulled back from eight-month highs on Tuesday as optimism over Moderna's experimental Covid-19 vaccine was offset by worries about tighter coronavirus restrictions across the continent.

Sweden is moving to restrict the size of public gatherings after a spike in new coronavirus cases.

A British medical adviser said that the three-tier system may need to be "strengthened" to get the country "through the winter."

Lingering uncertainty over a possible fiscal stimulus package in the U.S. also kept investors worried as global Covid-19 cases topped 55 million.

Federal Reserve Vice Chair Richard Clarida said on Monday that more support would be needed from fiscal and monetary authorities to ensure a strong recovery from the coronavirus pandemic.

While the U.K.’s FTSE 100 Index has plunged by 1.4 percent, the French CAC 40 Index and the German DAX Index are both down by 0.5 percent.

The British pound has edged higher after reports that Britain could reach a post-Brexit trade agreement with the European Union by early next week.

Britain's chief negotiator David Frost is said to have pinpointed “a possible landing zone” between the EU and Britain in the seven days ahead, The Sun reported.

Oil and gas stocks are moving lower, with both BP Plc and Royal Dutch Shell showing notable moves to the downside.

Train maker Alstom has also fallen a day after launching a €2 billion-euro rights issue to fund its acquisition of Bombardier Transportation.

BBVA has plunged, while its smaller rival Banco de Sabadell has jumped on news that the two Spanish banks were in talks over a tie-up.

Imperial Brands has moved sharply higher after the tobacco company forecast a return to profit growth this fiscal year.

U.S. Economic Reports

After reporting a sharp increase in U.S. retail sales in the previous month, the Commerce Department released a report on Tuesday showing retail sales rose by less than expected in the month of October.

The report said retail sales rose by 0.3 percent in October after jumping by a downwardly revised 1.6 percent in September.

Economists had expected retail sales to climb by 0.5 percent compared to the 1.9 percent spike originally reported for the previous month.

Excluding an increase in sales by motor vehicle and parts dealers, retail sales edged up by 0.2 percent in October after surging up by 1.2 percent in September. Ex-auto sales were expected to increase by 0.6 percent.

A separate report from the Labor Department showed U.S. import prices unexpectedly edged lower in the month of October.

The Labor Department said import prices slipped by 0.1 percent in October after rising by a downwardly revised 0.2 percent in September.

Economists had expected import prices to rise by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.

Meanwhile, the report said export prices crept up by 0.2 percent in October after climbing by 0.6 percent in September. Export prices were expected to rise by 0.3 percent.

The Federal Reserve is scheduled to release its report on industrial production in the month of October at 9:15 am ET. Industrial production is expected to jump by 1.0 percent in October after falling by 0.6 percent in September.

At 10 am ET, the National Association of Home Builders is due to release its report on homebuilder confidence in the month of November. The housing market index is expected to come in unchanged at 85.

The Commerce Department is also scheduled to release its report on business inventories in the month of September at 10 am ET. Economists expect business inventories to rise by 0.5 percent.

At 1 pm ET, Atlanta Federal Reserve President Raphael Bostic is due to give opening remarks via Zoom at a "Racism and the Economy: Focus on Employment" webinar event jointly hosted by the Federal Reserve Banks of Atlanta, Boston, Cleveland, Dallas, Minneapolis, and San Francisco.

San Francisco Fed President Mary Daly is scheduled to speak in a moderated Q&A at the "Racism and the Economy: Focus on Employment" webinar event at 1:25 pm ET.

At 2 pm ET, New York Federal Reserve President John Williams is due to moderate a virtual conversation held by the Economic Club of New York.

Bostic, Daly, and Boston Fed President Eric Rosengren are scheduled to participate in a "Presidents Conversation" at the "Racism and the Economy: Focus on Employment" webinar event at 2:35 pm ET.

At 2:50 pm ET, Daly and Rosengren are due to give closing remarks at the "Racism and the Economy: Focus on Employment" webinar event.

Richmond Federal Reserve President Thomas Barkin is scheduled to speak about the economy at a Charlotte Chamber of Commerce virtual event at 3 pm ET.

Stocks In Focus

Drug store chains Walgreens (WBA), CVS Health (CVS) and Rite Aid (RAD) are moving sharply lower in pre-market trading after Amazon (AMZN) announced the launch of a digital pharmacy.

Shares of Kohl’s (KSS) may also move to the downside after the department store chain reported an unexpected adjusted third quarter profit but weaker than expected comparable store sales.

On the other hand, shares of Tesla (TSLA) are likely to see initial strength on news the electric car maker will be added to the S&P 500 effective prior to the open of trading on Monday, December 21.

Warehouse retailer Costco (COST) may also move to the upside after its Board of Directors declared a special cash dividend on Costco common stock of $10 per share.