S&P 500 Looks Set to Touch New Record High

(Reuters) -
American flags fly in front of the New York Stock Exchange. (AP Photo/Mark Lennihan, File)
American flags fly in front of the New York Stock Exchange. (AP Photo/Mark Lennihan, File)

The S&P 500 looked set to hit a record high on Monday as stock index futures rose after a stunning monthly jobs report last week boosted confidence in the U.S. economy.

U.S. stock markets rallied on Friday after data showed the economy added the most number of jobs in eight months in June, with the S&P closing just 5 points shy of its record high of 2,134.72.

“Reaching a new high may see money moving from the sidelines of safety trades, like Treasury bonds and gold, back into the equity markets,” said Robert Pavlik, chief market strategist at Boston Private Wealth.

“The emphasis of the markets will be how fast and how long the S&P remains above the record today.”

Much of how the indexes perform in the next few weeks will depend on the quality of second-quarter corporate earnings, which kick off with Alcoa reporting results after markets close on Monday.

Earnings of S&P 500 components are expected to fall 3.9 percent compared with the year-earlier quarter, according to Thomson Reuters data. First-quarter earnings had fallen 5 percent.

Investors will also watch out for comments from company executives, especially those of big banks later this week, on the impact of Britain’s vote to leave the European Union.

Shares of Citigroup, JPMorgan Bank of America and Wells Fargo were trading higher premarket on Friday.

While upbeat data in recent weeks has pointed to a recovery in the U.S. economy, the Federal Reserve is expected to remain cautious on raising interest rates as it gauges the fallout of the Brexit vote.

Dow e-minis were up 69 points, or 0.38 percent, at 8:32 a.m. ET, with 27,987 contracts changing hands. S&P 500 e-minis were up 7.25 points, or 0.34 percent, with 225,724 contracts traded. Nasdaq 100 e-minis were up 21.5 points, or 0.48 percent, on volume of 25,212 contracts.

Treasury yields hovered around record lows, indicating a weak appetite for riskier assets.

Oil prices fell on signs that U.S. shale drillers have adapted to lower prices and renewed indications of economic weakness in Asia where refiners are trimming crude runs.

Traders are not betting on significant chances of a rate hike anytime this year, according to CME Group’s FedWatch tool. The Fed next meets on July 26-27.