Stocks May Show A Lack Of Direction In Early Trading – U.S. Commentary

Following the roller coaster ride seen over the past few sessions, stocks may show a lack of direction in early trading on Monday. The major index futures are currently pointing to a roughly flat open for the markets, with the Dow futures up by just 12 points.

Traders may be reluctant to make significant moves as they keep a close eye on high-level trade talks between the U.S. and China in Beijing.

Deputy U.S. Trade Representative Jeffrey Gerrish is leading the U.S. team at the two-day meeting, with a spokesman for China’s Foreign Ministry predicting “positive and constructive discussions.”

News on the merger-and-acquisition front may generate some buying interest, although traders are likely to remain cautious amid the ongoing U.S. government shutdown.

Weekend meetings reportedly made little progress toward ending the impasse over funding for President Donald Trump’s controversial border wall.

Shortly after the start of trading, the Institute for Supply Management is scheduled to release its report on activity in the service sector in the month of December.

The ISM’s non-manufacturing index is expected to edge down to 59.0 in December after inching up to 60.7 in November, although a reading above 50 would still indicate growth in service sector activity.

Among individual stocks, shares of Loxo Oncology (LOXO) are spiking higher in pre-market trading after the biopharmaceutical company agreed to be acquired by drug giant Eli Lilly (LLY) for $235 per share in cash or approximately $8 billion.

Software development company Luxoft (LXFT) is also seeing substantial pre-market strength after agreeing to be acquired by IT and consulting services provider DXC Technology (DXC) for $59.00 per share in cash or approximately $2 billion.

On the other hand, shares of PG&E Corp. (PCG) are likely to come under pressure after a report from Reuters said the utility is exploring filing for bankruptcy protection for some or all of its business as it faces billions of dollars in liabilities related to fatal wildfires in 2018 and 2017.

Stocks showed a substantial move to the upside over the course of the trading day on Friday, more than offsetting the sharp pullback seen in the previous session. The major averages all moved significantly higher, with the tech-heavy Nasdaq leading the way.

The major averages moved roughly sideways going into the close, holding on to strong gains. The Dow surged up 746.94 points or 3.3 percent to 23,433.16, the Nasdaq soared 275.35 points or 4.3 percent to 6,738.86 and the S&P 500 spiked 84.05 points or 3.4 percent to 2,531.94.

With the rally on the day, the major averages also moved notably higher for the week. While the Dow jumped by 1.6 percent, the Nasdaq and the S&P 500 shot up by 2.3 percent and 1.9 percent, respectively.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Monday. Japan’s Nikkei 225 Index skyrocketed by 2.4 percent, while Hong Kong’s Hang Seng Index advanced by 0.8 percent.

Meanwhile, the major European markets have moved to the downside on the day. While the U.K.’s FTSE 100 Index has fallen by 0.5 percent, the German DAX Index and the French CAC 40 Index are down by 0.6 percent and 0.7 percent, respectively.

In commodities trading, crude oil futures are jumping $1.11 to $49.07 a barrel after climbing $0.87 to $47.96 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,294.40, up $8.60 from the previous session’s close of $1,285.80. On Friday, gold fell $9.

On the currency front, the U.S. dollar is trading at 108.39 yen compared to the 108.51 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1452 compared to last Friday’s $1.1395.

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