FX.co ★ U.S. Stocks May See Further Upside In Early Trading

The U.S. stock market is preparing for a potentially stronger opening on Monday, following last week's rally. The uplift is expected as tech stocks continue to show positive momentum stemming from positive reactions to robust tech earnings.

However, investors may tread more cautiously as they await the Federal Reserve's monetary policy announcement on Wednesday. The central bank is anticipated to keep interest rates steady, but comments from Fed Chair Jerome Powell during the post-meeting press conference could provide further insights on future rates. Economic data have diminished the likelihood of immediate rate cuts, with the central bank likely to hold rates steady until at least September.

Investors may also stay on the sidelines in anticipation of a wave of earnings announcements this week, along with the release of the Labor Department's keenly watched monthly jobs report.

On Friday, a significant rise was observed in stocks, largely counterbalancing the faltering performance during Thursday's session. The NASDAQ, filled with tech stocks, drove the rise.

Even though the stock market slightly fell off their peak levels towards the end of the day, the NASDAQ, S&P 500, and Dow remained solidly positive. In terms of weekly performance, NASDAQ surged by 4.2 percent, S&P 500 escalated by 2.7 percent, and Dow rose by 0.7 percent.

The upswing on Wall Street is largely attributed to favorable reactions to recent earnings reports from key tech companies. Shares of Alphabet and Microsoft soared following better-than-expected quarterly results. Snap also experienced a sharp rise in share prices after surpassing expectations for the first quarter. Intel, however, saw shares plunge as the company disappointed with its future guidance despite beating earnings estimates.

Positive reactions were also observed on official inflation figures from the Commerce Department. The figures showed that consumer prices in the U.S. increased as per economist estimates in March.

Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, believes the market will have to adjust to the new normal of elevated inflation levels in 2024 and abandon hopes of Federal Reserve rate cuts. However, he remains optimistic about the stock market given continued economic expansion and growth in corporate profits.

Despite the tumble in Intel stocks, semiconductor stocks were significantly ahead, underpinned by a 2.6 percent gain in the Philadelphia Semiconductor Index. Software and networking stocks also chalked up considerable gains on the back of Microsoft's upbeat results.

Retail, computer hardware, and brokerage stocks also witnessed upward trends, while utility stocks swam against the tide.The price of crude oil futures has dropped to $83.25 a barrel, descending by $0.60 compared to the previous increase of $0.28 on Friday, when it rose to $83.85 barrel. Meanwhile, the price of gold futures has seen a minimal drop of $0.30, currently standing at $2,346.90 after rising by $4.70 to $2,347.20 an ounce in the past trading session.

In terms of currency, the U.S. dollar is currently trading at 156.40 yen, a significant drop compared to Friday’s close at 158.33 yen. The dollar is also trading at $1.0716 against the euro, only a slight increase from last Friday’s $1.0693.

Asian stocks experienced a boost in Monday’s thin trading, despite Japanese markets being closed for a holiday. Traders are anticipating the Federal Reserve's policy meeting on Wednesday, following a largely expected inflation gauge from the central bank. While no change in interest rates is forecasted, Jerome Powell, the Chair of the Federal Reserve may provide some indication in a post-meeting statement and press conference about potential interest rate movements.

During early Asian trading, the yen made a significant surge, hitting 160 against the dollar. This has resulted in speculation over whether or not authorities will intervene to support the Japanese currency. Oil prices experienced a drop of 1 percent, and gold saw modest losses following U.S. Secretary of State Antony Blinken’s efforts to secure a truce in Gaza in the Middle East. Speaking on Friday, Bank of Japan Governor Kazuo Ueda downplayed the impact of the weak yen on fueling inflation.

Chinese and Hong Kong markets reported strong gains in contrast to a decrease in March industrial profits which cast doubt on China's economic recovery. China's Shanghai Composite Index rose by 0.8 percent to 3,113.04, while Hong Kong's Hang Seng Index increased by 0.5 percent to 17,746.91. Property developers led the gains on hopes that more stimulus measures will be unveiled in the coming week.

In Seoul, stocks rallied, with the Kospi average making a significant leap of 1.2 percent to 2,687.44 due to large-cap gains. Chemical producer LG Chem saw a surge of 5.9 percent and pharmaceutical leader Celltrion experienced an increase of 4 percent. Australian markets ended notably higher, led by banks and healthcare stocks with the S&P/ASX 200 Index advancing by 0.8 percent to 7,637.40, marking its best single-day gain since April 22. The broader All Ordinaries Index closed 0.9 percent higher at 7,906.60. New Zealand's S&P/NZX 50 Index also climbed by 0.9 percent to 11,916.24.

Turning to Europe, modest gains were seen in Monday's stocks as investors anticipate the Federal Reserve's policy decision later in the week. The German DAX Index remained fairly steady, the French CAC 40 Index rose 0.1 percent and the U.K.'s FTSE 100 Index increased by 0.4 percent.

In Spain, despite exceeding expectations for the first quarter and raising its profit guidance for 2024, BBVA's shares decreased by 1.4 percent. Mining giant Anglo American rejected a US$39Bn takeover bid from Australia-based BHP, causing shares to increase by 1.3 percent in London. Shares in Oxford Biomedica increased by 6.4 percent, the cell and gene therapy organisation reported a steady core business and reiterated its financial guidance for the near and medium term. Vivendi shares decreased by 1 percent after announcing a surge in first-quarter revenues. Atos SE saw a dramatic increase of nearly 16 percent after French Finance Minister Bruno Le Maire said he moved to buy the "sovereign activities" of the debt-ridden Atos to prevent foreign ownership. Deutsche Bank shares slumped 6.1 percent as litigation surrounding its Postbank acquisition continues, a provision will affect second-quarter and full-year profitability as well as capital ratios with the total claims and accumulated interest estimated at about 1.3 billion euros.

Presently no significant U.S. economic data is set to be released.