FX.co ★ Profit Taking May Contribute To Initial Pullback On Wall Street

The U.S. stock market appears set for a slightly lower start this week, following last week’s robust performance. The NASDAQ and S&P 500 reached record closing highs last Friday, and investors may be looking to capitalise on these recent gains.

The trading week may begin at a subdued pace due to a lack of significant U.S. economic data. However, several key events later this week could liven up the trading activity. One such event is the congressional testimony of Federal Reserve Chair Jerome Powell, the comments from whom will be keenly analysed for telltale signs concerning future interest rates.

Powell's testimony is scheduled for Wednesday before the House Financial Services Committee, and Thursday before the Senate Banking Committee. The focus will then shift to the Labor Department's February employment report, expected Friday, which is projected to reveal a 200,000-job increase after January's surge of 353,000 jobs.

On Tuesday, the Institute for Supply Management (ISM) will release its service sector activity index for February. With January's rate at 53.4, a modest drop to 53.0 is predicted for February. However, anything above 50 indicates growth. Additional reports on factory orders, private sector employment, U.S. trade deficit, weekly jobless claims, along with the Fed's Beige Book, will also be announced this week.

Stocks showed robust upward movement last Friday, with the NASDAQ and S&P 500 reaching new record closing highs. While the NASDAQ increased by 1.1% and the S&P 500 climbed by 0.8%, the Dow showed modest gains, rising by only 0.2%. For the week overall, the NASDAQ went up 1.7%, S&P 500 increased 1.0%, but the Dow fell by 0.1%.

Computer hardware stocks, led by Dell’s outstanding results, significantly contributed to NASDAQ’s surge, with the NYSE Arca Computer Hardware Index soaring to a record closing high by 6.9%. Dell’s shares themselves skyrocketed by 31.6% following the release of its better-than-expected fourth-quarter results.

Moreover, Dell's strong performance boosted semiconductor stocks, while biotechnology and networking stocks, as well as gold, oil service, and pharmaceutical stocks also showed substantial gains. On the other hand, the Institute for Supply Management reported that U.S. manufacturing activity shrank rapidly in February, a downturn that might further expect the Federal Reserve to cut interest rates.

In global markets, crude oil futures are falling after a solid jump last Friday, while Gold, after a significant increase in the last session, is slightly down. As for currency, the U.S. dollar is currently trading higher against yen while remaining mostly stable against the euro.

In Asia, stock markets were mixed on Monday, as investors awaited the inevitable outcome of Powell's upcoming testimony and the annual meeting of China's leading political advisory body. The U.S. dollar moved in a narrow range while gold stayed near a two-month high, driven by hopes of a Fed rate cut in June.Oil prices remain close to the highest levels seen this year in the wake of OPEC+ producer group's decision to extend discretionary production cuts.

In China, the Shanghai Composite Index grew by 0.4 percent to reach 3,039.31 following the commencement of the annual Congress. Investors are hopeful about potential measures aimed at revitalising the slowing economy and repairing the property sector. The International Monetary Fund has stated that policies aimed at accelerating the clean-up of struggling developers will pave the way for a reduced, more sustainable role in the Chinese economy.

In Hong Kong, the Hang Seng Index closed marginally higher at 16,595.97 after fluctuating throughout the day. In Japan, shares increased after the government claimed success in defeating inflation - pushing the Nikkei 225 Index up by half a percent to 40,109.23, a new record, led by tech stocks. Although the broader Topix Index was marginally lower, Advantest and Renesas Electronics soared 3.7 and 4.9 percent respectively due to a predicted boom in artificial intelligence.

South Korea's Kospi rose by 1.2 percent to 2,674.27, driven by continued buying by foreign investors and a rise in industrial production.

In Australia, however, markets edged down slightly following inconsistent data on company profits and building approvals. Mining and energy stocks experienced losses ahead of Q4 GDP data due on Wednesday. Renewable energy firm Genex Power saw a 32.4 percent rise following a takeover offer from Japan's Electric Power Development.

In Europe, shares were mixed ahead of the U.K. Spring Budget, Fed Chair Jerome Powell's congressional testimony, and the European Central Bank's interest rate decision. Stocks also reacted to the Eurozone Sentix Investor Confidence Index's rise from -12.9 in February to -10.5 in March.

In the corporate sphere, banking major ING plans to repurchase up to 50 million euros of common shares; Banco Santander is reported to have cut about 320 jobs in the U.S. to refocus on digital operations; and Craneware, a British healthcare software specialist, reported an 8 percent revenue increase in the latter half of last year.

On the other hand, low-budget airline Wizz Air Holdings reported a 3.3 percent drop in the load factor last month, and Boeing supplier Senior saw a 1.1 percent decline in spite of posting strong financial results for the year ended December 31, 2023.

In the U.S, Patrick Harker, President of the Philadelphia Federal Reserve, is scheduled to discuss the "economic impact of higher education" in an upcoming summit on education policies.