U.S. stock index futures slipped lower Tuesday after a three-day break, with Chinese equities wilting on disappointment over the monetary stimulus efforts in the world’s number-two economy.
What’s happening
-
Dow Jones Industrial Average futures
YM00,
-0.31%
fell 109 points, or 0.3%, to 34,495. -
S&P 500 futures
ES00,
-0.26%
dropped 11 points, or 0.2%, to 4,442. -
Nasdaq 100 futures
NQ00,
-0.16%
decreased 28 points, or 0.1%, to 15,239.
On Friday, the Dow Jones Industrial Average
DJIA,
fell 109 points, or 0.32%, to 34299, the S&P 500
SPX,
declined 16 points, or 0.37%, to 4410, and the Nasdaq Composite
COMP,
dropped 93 points, or 0.68%, to 13690.
What’s driving markets
Investors were in a cautious mood following the U.S. long weekend in honor of the Juneteenth federal holiday, but that’s after a strong run. The S&P 500 gained 2.6% last week, its fifth week in a row of gains, as the tech-heavy Nasdaq Composite took its winning run to eight weeks.
Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, said both retail and institutional investor sentiment are at their highest levels in over two years.
“We note that the consensus is right about 80% of the time, which means such shifts in sentiment and positioning can often be right as the collective intelligence of the market knows best,” he said. “However, given our fundamental view on growth, we find it hard to get on board with the current excitement and narrative supporting it. In other words, if second half growth re-accelerates as expected, then the bullish narrative being used to support equity prices will be proven correct.”
One event that investors have to weigh is the resumption this fall of student loan payments, and what that may mean for consumers’ disposable income. Student loan payments have been paused since the start of the pandemic in March 2020.
China cut its 1- and 5-year lending rates by 10 basis points, which investors viewed to be modest, particularly after a Friday state council meeting didn’t result in other concrete measures. According to Societe Generale, there were expectations the 5-year rate, the benchmark for mortgages, would be cut by 15 basis points.
The Hang Seng
HSI,
fell 1.5% in Hong Kong.
Alibaba
BABA,
the Chinese internet giant, also was in the spotlight after announcing that its CEO and chairman will step down to focus on the cloud division, with Brooklyn Nets owner Joseph Tsai becoming chairman.
Tuesday’s economic data include housing starts data, which showed a 21.7% rise in May after a revised 2.9% drop in April. Building permits also climbed 5.2% in May.
A panel later Tuesday will include both New York Federal Reserve President John Williams and Fed Vice Chair for Supervision Michael Barr. On Wednesday Fed Chair Jerome Powell is due to deliver semi-annual congressional testimony.
Companies in focus
-
Alibaba Group Holding Ltd.
BABA,
-0.11%
shares fell 2.1% in premarket trading after the Chinese e-commerce said Daniel Zhang will step down from chairman and chief executive officer roles. He will stay on to lead the cloud business, due to be spun off. -
Nio Inc.
NIO,
-3.98% ,
the Chinese EV maker, fell more than 2% , as U.S.-listed stocks played catchup with two days of weakness for China markets. Goldman Sachs cut its growth forecasts for the country and the People’s Bank of China on Tuesday announced cuts in lending rates, the extent of which which disappointed some. -
WeWork Inc.
WE,
+13.16%
tumbled 5% as shareholders voted overwhelmingly for a reverse stock split, according to a Securities and Exchange Commission filing on Friday. -
Virgin Galactic Holdings Inc.
SPCE,
+16.50%
shares are more than 1.5% higher in the premarket, continuing a rally from last week. The space travel company is preparing for its first commercial flight later this month.
