US Futures Fluctuate Amid Caution Over Economy: Markets Wrap

(Bloomberg) — US stock-index futures slipped and the dollar rose as investors fretted over signs of a sharp economic slowdown even as the Federal Reserve stays on the path of monetary tightening.

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September contracts on the S&P 500 and Nasdaq 100 indexes dropped 0.2% each after the equity benchmarks advanced on Monday. Crude oil retreated amid economic headwinds that clouded the demand outlook and prospects for an increase in supply. The greenback settled higher after fluctuating between gains and losses. Chinese stocks listed in the US declined in premarket trading.

A sharp drop in New York state manufacturing, the second-worst reading since 2001, along with the longest streak of declines since 2007 in homebuilder sentiment, sparked short-lived optimism in the equity markets that the Fed may slow interest-rate hikes. However, it was soon outweighed by fears of a recession and belief among some traders the Fed could still press ahead with its tightening irrespective of a slowdown.

“The lack of clear direction is driving the markets up and down,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note. “Yesterday’s data softens the case for the continuation of the steep recovery, and throws the foundation of a period of consolidation, and perhaps a downside correction.”

Clues on how sensitive the Fed is to unfolding economic data may be known when the minutes of the last meeting of the Federal Open Market Committee is released on Wednesday. Officials including Esther George and Neel Kashkari are also set to speak. However, the big event investors are waiting for is the annual monetary policy symposium at Jackson Hole, Wyoming during Aug. 25-27. Traders are bracing for higher volatility until then.

“The risk of the markets going below the June lows is quite high,” Shane Oliver, head of investment strategy at AMP Services Ltd., said on Bloomberg Television. Sagging economic data presage “weaker” US earnings, he added.

Treasuries were mixed, while European bonds fell. Europe’s Stoxx 600 equity gauge advanced for a fifth day, its longest streak since March, with commodity producers and utilities posting some of the biggest gains.

An Asia-Pacific equity index retreated on Tuesday, dragged down by Chinese tech shares on a report that social media giant Tencent Holdings Ltd. plans to sell all or a bulk of its $24 billion stake in food-delivery firm Meituan in part to appease regulators.

Chinese stocks listed in New York fell in premarket trading following the Tencent report. Pinduoduo Inc. lost 4%, while JD.com Inc. declined 2.2%.

Zoom Video Communications slid 3% after Citigroup Inc. downgraded its recommendation on the stock to sell from neutral, seeing “new hurdles to sustaining growth.”

West Texas Intermediate futures slid below $89 a barrel after falling around 5% over the previous two sessions. Besides economic worries, investors are also facing the prospect of rising supply as demand moderates. Libya is pumping more and Iran is edging closer to reviving a nuclear deal that will likely see higher crude flows.

Here are some key events to watch this week:

  • Earnings include Walmart, Target, Home Depot, Tencent

  • Federal Reserve July minutes, Wednesday

  • New Zealand rate decision, Wednesday

  • UK CPI, US retail sales, Wednesday

  • Australia unemployment, Thursday

  • U.S. existing home sales, initial jobless claims, Conference Board leading index, Thursday

  • Fed’s Esther George, Neel Kashkari speak at separate events, Thursday

Some of the main moves in markets:

Stocks

  • Futures on the S&P 500 fell 0.2% as of 6:37 a.m. New York time

  • Futures on the Nasdaq 100 fell 0.2%

  • Futures on the Dow Jones Industrial Average fell 0.2%

  • The Stoxx Europe 600 rose 0.3%

  • The MSCI World index fell 0.1%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.3%

  • The euro fell 0.3% to $1.0129

  • The British pound fell 0.3% to $1.2019

  • The Japanese yen fell 0.6% to 134.14 per dollar

Bonds

  • The yield on 10-year Treasuries was little changed at 2.79%

  • Germany’s 10-year yield advanced two basis points to 0.92%

  • Britain’s 10-year yield advanced two basis points to 2.04%

Commodities

  • West Texas Intermediate crude fell 1% to $88.51 a barrel

  • Gold futures fell 0.5% to $1,789.40 an ounce

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