Modupe Gbadeyanka
By Investors Hub
The major U.S. index futures are pointing to a higher opening on Tuesday, with stocks likely to extend the upward trend seen in recent sessions.
The markets may benefit from recent upward momentum, which has helped the major averages close higher for three consecutive sessions.
The recent advance by stocks comes despite lingering concerns about a global trade war as tariffs on billions of dollars of U.S. and Chinese goods are set to take effect later this week.
Signs of continued strength in the U.S. economy despite the ongoing trade disputes may be inspiring traders to pick up stocks.
Trading activity is likely to remain relatively subdued, however, as the markets are due to close earlier than normal ahead of the July 4th holiday.
Following the holiday, traders are likely to keep a close eye on the minutes of the latest Federal Reserve meeting as well as the Labor Department?s monthly jobs report.
After coming under pressure early in the session, stocks showed a significant turnaround over the course of the trading day on Monday. The major averages climbed well off their lows of the session and into positive territory.
The major averages all closed higher, with the Nasdaq outperforming its counterparts. While the Nasdaq advanced 57.38 points or 0.8 percent to 7,567.69, the Dow edged up 35.77 points or 0.2 percent to 24,307.18 and the S&P 500 rose 8.34 points or 0.3 percent to 2,726.71.
The rebound on Wall Street came following the release of a report from the Institute for Supply management showing growth in U.S. manufacturing activity unexpectedly accelerated in the month of June.
The ISM said its purchasing managers index climbed to 60.2 in June after rising to 58.7 in May, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to edge down to 58.4.
“The increase in the ISM manufacturing index in June is a clear sign that, for now at least, the strength of the domestic economy is more than offsetting any increased uncertainty on trade policy,” said Michael Pearce, Senior U.S. Economist at Capital Economics.
He added, “However, with the dollar appreciating by 6% since April, global growth slowing and retaliatory tariffs just beginning to bite, the sector looks unlikely to fare so well for long.”
Stocks initially moved lower on lingering trade concerns as tariffs on $34 billion worth of Chinese imports to the U.S. and a matching $34 billion worth of U.S. exports to China are due to take effect on July 6th.
Adding to the concerns, news website Axios obtained a leaked draft of bill ordered by President Donald Trump that would declare America’s abandonment of fundamental World Trade Organization rules.
The bill, known as the United States Fair and Reciprocal Tariff Act, essentially provides Trump a license to raise U.S. tariffs at will, without congressional consent, Axios said.
“It would be the equivalent of walking away from the WTO and our commitments there without us actually notifying our withdrawal,” a source familiar with the bill told Axios.
Nonetheless, the source noted Congress would never give the president the authority, and a White House spokeswoman told Axios the administration does not have actual legislation it is preparing to rollout.
A previous report from Axios said Trump has repeatedly told top White House officials he wants to withdraw the United States from the World Trade Organization.
Additionally, the European Commission has warned the Trump administration that imposing tariffs on cars imported from Europe will harm trade, growth and jobs in the U.S. and abroad.
Overall trading activity was somewhat subdued, however, with the upcoming July 4th holiday keeping some traders on the sidelines.
Later this week, trading may be impacted by reaction to the Labor Department’s monthly jobs report and the minutes of the latest Federal Reserve meeting.
Computer hardware stocks showed a strong move to the upside on the day, contributing to the advance by the tech-heavy Nasdaq. Reflecting the strength in the hardware sector, the NYSE Arca Computer Hardware Index climbed 1.3 percent.
Notable strength also emerged among transportation and biotechnology stocks, with the Dow Jones Transportation Average and the NYSE Arca Biotechnology Index both rising by 1 percent.
On the other hand, substantial weakness remained visible among oil service stocks, as reflected by the 3 percent slump by the Philadelphia Oil Service Index.
Other energy stocks also moved to the downside, with the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index falling by 1.4 percent and 1.3 percent, respectively.
