Optimism About End Of Government Shutdown May Lead To Initial Rally On Wall Street

(RTTNews) - The major U.S. index futures are currently pointing to a sharply higher open on Monday, with stocks likely to regain ground after seeing considerable weakness last week.

The upward momentum on Wall Street comes after the Senate voted to advance legislation to end the government shutdown, which recently became the longest in U.S. history.

The Senate voted 60-40 in favor of a temporary funding bill, which would also reverse some of the recent mass federal layoffs.

Several Democratic Senators broke with party leaders in favor of moving forward with the legislation, as it does call for a vote on the extension of enhanced Obamacare tax credits.

Final approval of the bill could be delayed by any one Senator, and the legislation still needs to be approved the Republican-controlled House of Representatives.

While the markets have largely shrugged off concerns about the shutdown in recent weeks, the news may still lead traders to pick up stocks at somewhat reduced levels following recent valuation worries.

The end of the shutdown would also lead to the resumption of the release of key U.S. economic data that has recently been withheld.

"A key impact on the markets of the impasse, beyond the hit to the wider economy, has been the lack of data as key releases on areas like the jobs market have been delayed," said AJ Bell investment director Russ Mould.

"This has created a considerable dose of the uncertainty which markets famously hate and it is also hampering the ability of the Federal Reserve to make informed decisions on interest rates," he added. "In this context, it's not a surprise to see investors react positively to signs of progress."

After initially extending the sharp pullback seen during Thursday's session, stocks showed a significant rebound over the course of the trading day on Friday. The major averages climbed well off their lows of the session, with the Dow and the S&P 500 reaching positive territory.

The major averages ended the day narrowly mixed. While the Nasdaq dipped 49.46 points or 0.2 percent to 23,004.54 after plunging by as much as 2.1 percent, the S&P 500 inched up 8.48 points or 0.1 percent to 6,278.80 and the Dow rose 74.80 points or 0.2 percent to 46,987.10.

For the week, the tech-heavy Nasdaq plummeted by 3.0 percent, while the S&P 500 tumbled by 1.7 percent and the Dow slumped by 1.2 percent.

The recovery attempt seen in afternoon trading may have reflected optimism about an end to the prolonged government shutdown following an offer from top Senate Democrat Chuck Schumer.

Schumer offered to provide Democratic support for passage of a short-term funding bill to reopen the government in exchange for Republican support for a one-year extension of enhanced Obamacare tax credits.

In early trading, stocks extended yesterday's slump amid lingering concerns about valuations, as investors have recently expressed worries about an artificial intelligence bubble.

Valuation anxiety triggered a sell-off on Tuesday, with shares of Palantir Technologies (PLTR) plunging even though the software company reported better than expected fiscal fourth quarter results and raised its revenue guidance.

Goldman Sachs (GS) CEO David Solomon and Morgan Stanley (MS) CEO Ted Pick also warned of a significant correction by the markets over the next one to two years.

After a rebound on Wednesday, valuation concerns resurfaced on Thursday despite a lack of major catalysts.

Negative sentiment was also generated in reaction to a report from the University of Michigan showing consumer sentiment in the U.S. has deteriorated by much more than anticipated in the month of November.

The University of Michigan said its consumer sentiment index slid to 50.3 in November after falling to 53.6 in October. Economists had expected the index to edge down to 53.2.

With the much bigger than expected decrease, the consumer sentiment index dropped to its lowest level since hitting a record low of 50.0 in June 2022.

Surveys of Consumers Director Joanne Hsu noted consumers are now expressing worries about potential negative economic consequences of the U.S. government shutdown as the stalemate drags on for over a month.

Computer hardware stocks showed a substantial turnaround over the course of the trading session, with the NYSE Arca Computer Hardware Index surging by 3.2 percent after plunging by as much as 3.0 percent.

Significant strength also emerged among gold stocks, as reflected by the 2.3 percent jump by the NYSE Arca Gold Bugs Index. The strength in the sector came as the price of gold climbed back above the $4,000 an ounce level.

Natural gas airline and commercial real state stocks also showed strong moves to the upside on the day, while weakness remained visible among networking and semiconductor stocks.

Commodity, Currency Markets

Crude oil futures are increasing $0.25 to $60 a barrel after rising $0.32 to $59.75 barrel last Friday. Meanwhile, after climbing $18.80 to $4,009.80 an ounce in the previous session, gold futures are surging $98.90 to $4,108.70 an ounce.

On the currency front, the U.S. dollar is trading at 154.01 yen versus the 153.40 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1569 compared to last Friday's $1.1565.

Asia

Asian stocks advanced on Monday after the U.S. Senate voted 60-40 to advance legislation ending the longest-running government shutdown, which entered its 40th day on Sunday.

The bipartisan bill would fund most federal agencies through January and guarantee back pay for federal employees affected by the closure.

Sentiment was also underpinned after weekend data showed Chinese producer price deflation eased in October, while consumer prices returned to positive territory.

China's Shanghai Composite Index rose 0.5 percent to 4,018.60 as the inflation data helped ease deflation worries.

Data showed Chinese consumer prices unexpectedly rose 0.2 percent in October after a 0.3 percent decline in the previous months. Analysts had expected no change. Producer prices shrank 2.1 percent last month, marking the softest decrease in 14 months.

Some analysts have cautioned that the surprise uptick in CPI was mostly boosted by October's national day holiday spending and could be temporary.

Hong Kong's Hang Seng Index surged 1.6 percent to 26,649.06 as technology stocks rebounded from last week's sell-off on valuation concerns.

Japanese markets ended sharply higher, led by gains in the technology sector. The Nikkei 226 Index jumped 1.3 percent to 50,911.76, while the broader Topix Index settled 0.6 percent higher at 3,317.42.

SoftBank Group rallied 2.6 percent, Tokyo Electron surged 4.3 percent and Advantest added 3.8 percent, although automaker Honda Motor slumped 4.7 percent after cutting its annual earnings forecast.

Seoul stocks soared on renewed optimism over AI and expectations of tax cuts. The Kospi spiked 3.0 percent to 4,073.24.

Samsung Electronics rallied 2.8 percent and SK Hynix surged 4.5 percent after Nvidia CEO Jensen Huang said that the semiconductor giant is experiencing "very strong demand" for its state-of-the-art Blackwell chips.

Hyundai Motor, Doosan Enerbility and HD Hyundai Heavy Industries rose 2-3 percent.

Australian markets ended notably higher amid a strong rally in gold, energy and bank stocks. The benchmark S&P/ASX 200 Index climbed 0.8 percent to 8,835.90, notching its best single-day gain in nearly a month. The broader All Ordinaries Index closed 0.9 percent higher at 9,109.40.

Earlier in the day, Reserve Bank of Australia Deputy Governor Andrew Hauser stated that the central bank aims to curb inflation with restrictive policy and that interest rates may drop by late 2025.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 Index inched up by 0.1 percent to 13,617.48.

Europe

European shares have moved sharply higher on Monday after the U.S. moved one step closer towards ending the historic government shutdown.

The U.S. Senate voted 60-40 to end the longest-running government shutdown, which entered its 40th day on Sunday.

The bipartisan legislation would fund most federal agencies through January and guarantee back pay for federal employees affected by the closure.

While the German DAX Index is up by 1.8 percent, the French CAC 40 Index is up by 1.5 percent and the U.K.'s FTSE 100 Index is up by 0.9 percent.

In corporate news, German automotive and industrial supplier Stabilus has rallied despite reporting a steep decline in preliminary net profit for the full year, mainly due to one-off effects, uncertain market environment and the U.S. tariff policy.

Likewise, steelmaker Salzgitter has also moved sharply lower despite lowering its full-year guidance for the second time this year.

Hannover Re has also shown a strong move to the upside after lifting its full-year earnings forecast.

Diageo, the world's top spirits maker, has also surged after it named former Tesco boss Sir Dave Lewis as its new chief executive.

U.S. Economic News

The Treasury Department is scheduled to announce the results of this month's auction of $58 billion worth of three-year notes at 1 pm ET.