Overbought Markets Set To Pause As Reporting Season Unfolds

(RTTNews) - The major U.S. index futures are pointing to a flat opening on Monday, with sentiment reflecting nervousness of traders as the reporting season unfolds. A M&A deal in the tech space involving Dell and EMC could infuse some optimism into the markets. Commodities are in the rally mode, although oil is flat lining. At the same time, the dollar is weaker. The markets may also stay tuned to a couple of Fed speeches scheduled for the day.

Fueled by the commodity rally, U.S. stocks advanced solidly in the week ended October 9th. With the Fed relaying a dovish message through the FOMC minutes and supply concerns rising from geopolitical concerns, commodities rallied strongly during the week.

Last Monday, the averages rallied strongly on tempered rate hike expectations, with the Dow Industrials and the S&P 500 Index settling at about a 7-week high. Profit taking trimmed some of the buoyancy on Tuesday amid a lack of any meaningful trading cues, resulting in a mixed close.

The markets largely ignored some lackluster earnings announcement and rode on the risk appetite, ending Wednesday's session moderately higher. The FOMC minutes helped the markets sustain the upward momentum on Thursday. Notwithstanding the disappointing earnings report of Alcoa stirring earnings worries ahead of the reporting season, the major averages ended higher on Friday, although the session was marred by volatility.

For the week ended October 9th, the Dow Industrials and the S&P 500 Index rallied 3.72 percent and 3.26 percent and 3.26 percent, respectively, for the week and the Nasdaq Composite added 2.61 percent.

Among the sectors, the NYSE Arca Gold Bugs Index and the Philadelphia Oil Service Index soared 16.28 percent and 12,41 percent, respectively. Additionally, the NYSE Arca Oil Index and the NYSE Arca Computer Hardware Index jumped 9.13 percent and 7.35 percent, respectively. On the other hand, the NYSE Arca Biotechnology Index receded 2.59 percent.

Currency, Commodity Markets

Crude oil futures are advancing $0.01 to $49.64 a barrel after settling the week ended October 9th up $4.09 or 8.98 percent at $49.63 a barrel. Gold futures, which rallied $19.30 or 1.70 percent to $1,155.90 an ounce in the previous week, are currently rising $9.60 to $1,165.50 an ounce.

Among currencies, the U.S. dollar ended higher in the week ended October 9th amid indications that a Fed rate hike will be pushed forward to the next year. The dollar rallied 1.27 percent against the euro to $1.1358 a euro and gained a more modest 0.30 percent against the yen before ending the week at 120.27 yen.

The U.S. dollar is currently trading at 120.12 yen and is valued at $1.1375 versus the euro.

Asia

Most Asian markets advanced, although the Australian and Hong Kong markets came under selling pressure. The Japanese market was closed for a public holiday. Commodities continued their good run, reflecting the risk appetite set in motion by hopes that the ultra-loose monetary policy of the Federal Reserve may not be shelved in the near term.

The Chinese market advanced notably on reports that quoted a People's Bank of China official, who said the equity market correction is almost over. The Shanghai Composite Index added 104.51 points or 3.28 percent before ending at 3,288, marking the highest level since August 21st, 2015.

Hong Kong's Hang Seng Index ended at 22,731, up 272.13 points or 1.21 percent.

Meanwhile, Australia's All Ordinaries opened lower and declined steeply in early trading and steadily thereafter. The index ended down 41.80 points or 0.79 percent at 5,267. The sell-off was broad based, with energy, healthcare and utility stocks leading the declines.

Europe

European stocks opened mixed and have been on divergent routes since then. The French market ignored a firm start and are currently lower and the U.K. market has been weak since the start, while the German DAX Index is advancing moderately.

In major corporate news, Glencore, which has seen its performance hit by declines in commodity prices, announced plans to divest copper mines in Australia and Chile. The sale proceeds are expected to help the company reduce its debt burden. In Germany, utilities E.ON and RWE rallied in reaction to the findings of a report commissioned by the German Federal Ministry of Economic Affairs and Energy that said provisions of nuclear power operators fully reflect futures obligations.

U.S. Economic Reports

The unfolding week's economic calendar is back-end loaded, with a few first-tier economic data due for release over Wednesday, Thursday and Friday. The Commerce Department's retail sales report for September, the Labor Department's weekly jobless claims report and consumer prices report for September, the results of separate manufacturing surveys for October by the New York Federal Reserve and the Philadelphia Federal Reserve, the Federal Reserve's industrial production report for September and preliminary reading of the University of Michigan's consumer sentiment reading for October are among the key economic readings to watch for in the week.

Several Fed speeches strewn across the week and the Beige Book report ahead of the October FOMC meeting may also garner the attention of traders. The Treasury's monthly budgetary statement for September, the Commerce Department's business inventories report for August and the Labor Department report on producer prices for final demand round up the economic events of the week.

Atlanta Federal Reserve Bank President Dennis Lockhart id due to speak in Orlando, Florida at 8:10 am ET. Chicago Federal Reserve Bank President Charles Evans will speak on the monetary policy in Chicago at 10:30 am ET. At 4:30 pm ET, Federal Reserve Governor Lael Brainard is scheduled to speak on the economic outlook to the NABE in Washington.

Stocks in Focus

Dell and EMC (EMC) have signed a definitive agreement for Dell to acquire EMC, while maintaining VMware as a publicly-traded company, in a transaction that would be valued at around $67 billion. Meanwhile, EMC (EMC) reported below-consensus preliminary results for the third quarter.

India's Infosys (INFY) reported better than expected second quarter results but it lowered its dollar revenue growth guidance. The company also announced the resignation of its CFO Rajiv Bansal.

NetApp (NTAP) recommended that shareholders reject a mini-tender offer by TRC Capital Corp. to purchase 3 million of its shares at $28.25 per share in cash.