US stock-index futures slipped and the dollar rises as investors fretted over signs of a sharp economic slowdown even as the Federal Reserve stays on the path of monetary tightening.
September contracts on the S&P 500 and Nasdaq 100 indexes dropped 0.2% each after the equity benchmarks advanced. 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 August 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 the “weaker” US
earnings, he added.
Treasuries were mixed, while European bonds fall. Europe’s Stoxx 600 equity gauge gains 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
Chinese stocks listed in New York falls 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.