U.S. Stock Futures Dip as Weak China Data Casts Shadow on Sentiment

Futures for the U.S. stock index decreased on Tuesday, as markets showcased a wary demeanor after the release of disappointing international trade data from China for the month of July.

Shares in banks garnered attention following an announcement by Moody’s Investor Service that it might lower its credit ratings on six major U.S. banks.

How are stock-index futures trading

  • Futures for the S&P 500 ES00 experienced a 34-point decrease, which represents a 0.7% drop, bringing the level to 4,503.75.
  • Futures for the Dow Jones Industrial Average YM00 have fallen by 264 points, representing a 0.7% decrease, bringing it down to 35,290.
  • Futures for the Nasdaq 100 NQ00 fell by 123.75 points, a decrease of 0.8%, dropping to 15,361.75.

On Monday, the Dow Jones Industrial Average increased by 408 points or 1.2%. Concurrently, the S&P 500 rose by 0.9% and the Nasdaq Composite saw a 0.6% elevation.

What’s driving markets

A sense of caution was sweeping across international markets – leading to a suppression of US equity index futures – following poor Chinese trade figures which amplified worries about a decelerating global economy.

China experienced a record decrease in exports of 14.5% year-on-year up to July, marking the largest decline since the COVID-19 pandemic hit in February 2020. Imports also declined significantly by 12.4%, a rate worse than predicted.

Jim Reid, a strategist at Deutsche Bank, commented on the news stressing that the world’s second largest economy is experiencing a decline due to a decrease in global demand and a domestic downturn.

Assets linked to Chinese demand experienced a downturn, with industrial commodities such as crude oil CL and copper HG00 declining. Stocks in miners listed in London were also under stress.

Perceived safe investments were stronger, with the dollar increasing in value and government bonds appealing to investors, leading to a decrease in Treasury yields.

The mood was further impacted by a possible downgrade of six major U.S. banks by Moody’s. This added to the worries about the stability of the financial sector, in the wake of the sharp increase in interest rates since March 2022.

The earnings report for the second quarter is still underway, featuring presentations from a number of businesses. Among them, UPS, Barrick Gold, Eli Lilly, and Under Armour will showcase their reports before market opening. Super Micro Computer and Lyft are set to reveal their figures following market close.

The data revealed that the U.S. trade deficit decreased by 4.1% to $65.5 billion in July.

President of the Federal Reserve Bank of Philadelphia, Patrick Harker, suggested that policy makers might have reached a stage where they can afford to be patient and maintain the rates as they are.

Companies in focus

  • Shares of Paramount Global, PARA, increased by 4% in premarket trading after the media firm’s adjusted profits surpassed estimates and the company confirmed the sale of Simon & Schuster for $1.6 billion to KKR.
  • Following an earnings report which showed a 30% decrease in year-over-year revenue, Beyond Meat Inc. BYND, a company well-known for its production of plant-based meat alternatives, saw its value plummet by 16%.
  • Eli Lilly & Co. LLY soared 9.0% to a record high during Tuesday’s premarket trading, following the announcement of their second-quarter earnings report which exceeded expectations. This increased their outlook for the full year, thanks in large part to the $579 million received from selling the rights to Baqsimi.
  • On Tuesday, United Parcel Service Inc. (UPS) saw its shares plummet to a six-week low following the announcement of its second-quarter revenue, which did not meet projected figures. The delivery behemoth also reduced its annual forecast, citing the influence of labor discussions on package volume.

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