US Shares Open Higher on Rally by Chinese Stocks

By Investors Hub

The major U.S. index futures are pointing to a higher open on Monday, with stocks likely to move to the upside following the mixed performance seen last week.

The upward momentum on Wall Street comes on the heels of a rally by Chinese stocks, which extended the substantial rebound seen last Friday.

Chinese stocks surged higher amid optimism about additional stimulus to stimulate the world?s second largest economy after last week?s disappointing GDP data.

After three top Chinese financial regulators stepped in to bolster investor confidence last Friday, Chinese President Xi Jinping vowed ?unwavering? support for the country’s private sector.

In an open letter published in state media, Xi said Beijing would continue to value and protect the country’s private business owners to ensure a ?better tomorrow.?

Overall trading activity may be somewhat subdued, however, as a lack of major U.S. economic data may keep some traders on the sidelines.

After failing to sustain an early move to the upside, stocks turned mixed over the course of the trading session on Friday. The major averages pulled back well off their highs of the session, with the Nasdaq and the S&P 500 ending the day in negative territory.

While the Dow rose 64.89 points or 0.3 percent to 25,444.34, the Nasdaq fell 36.11 points or 0.5 percent to 7,449.03 and the S&P 500 edged down 1.00 points or less than a tenth of a percent to 2.767.78.

The major averages also turned in a mixed performance for the week. The Nasdaq fell by 0.6 percent, while the Dow rose by 0.4 percent and the S&P 500 was nearly flat.

Early buying interest was generated by a rally by Chinese stocks, which rebounded strongly from an initial move to the downside despite disappointing GDP data.

Data showed Chinese GDP climbed an annual 6.5 percent in the third quarter, shy of estimates for 6.6 percent and down from 6.7 percent in the previous quarter.

However, investors reacted positively after three top Chinese financial regulators stepped in to bolster investor confidence.

The heads of the People’s Bank of China, the Securities Regulatory Commission and the Banking and Insurance Regulatory Commission all issued statements expressing support for the markets.

A positive reaction to upbeat earnings news from big-name companies such as Procter & Gamble (PG), American Express (AXP) and Honeywell (HON) also contributed to the early strength on Wall Street.

Traders seemed reluctant to make more significant moves, however, as concerns about rising interest rates and tension between the U.S. and Saudi Arabia continued to weigh on the markets.

Meanwhile, traders largely shrugged off a report from the National Association of Realtors showing a much steeper than expected drop in existing home sales in the month of September.

NAR said existing home sales plunged by 3.4 percent to an annual rate of 5.15 million in September after edging down by 0.2 percent to a revised rate of 5.33 million in August. Economists had expected existing home sales to drop by 0.7 percent.

With the much bigger than expected decrease, existing home sales slumped to their lowest annual rate since November of 2015.

Utilities stocks showed a significant move to the upside on the day, driving the Dow Jones Utilities Average up by 1.6 percent. With the gain, the average reached its best closing level in ten months.

Notable strength was also visible among telecom stocks, as reflected by the 2.2 percent advance by the NYSE Arca North American Telecom Index. The index rebounded following the pullback seen in the previous session, climbing further off the two-month closing low set last Thursday.

On the other hand, biotechnology stocks came under pressure over the course of the session, dragging the NYSE Arca Biotechnology Index down by 1.8 percent.

Oil stocks also moved to the downside despite an increase by the price of crude oil, moving notably lower along with housing, semiconductor, and networking stocks.