Three-Day Break Ends with U.S. Stock Futures Slipping: Market Analysis

On Tuesday, there was a decline in the American stock market futures after three days of stability. The reason behind this was that the Chinese equities were performing poorly as people were not happy with the measures taken by the government to stimulate the economy, which is the second largest in the world.

What’s Happening?

• The Dow Jones Industrial Average index futures, labeled as YM00 and showing a decrease of 0.32%, went down by 109 points causing its value to drop by 0.3% to 34,495 points.
• The S&P 500 futures, designated by the symbol ES00 and showing a decrease of 0.34%, went down by 11 points or 0.2% to hit the value of 4,442.
• The Nasdaq 100 futures, identified as NQ00, decreased by 28 points or 0.1% and finished at 15,239.

On Friday, there was a decrease in the stock market. The Dow Jones Industrial Average declined by 109 points or 0.32% to reach 34299. Similarly, the S&P 500 declined by 16 points or 0.37% to reach 4410, and the Nasdaq Composite decreased by 93 points or 0.68% to reach 13690.

What’s Driving Markets

Despite the S&P 500’s fifth week of gains and the Nasdaq Composite’s eight-week winning streak, investors showed cautiousness after the U.S. Juneteenth holiday. Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, stated that institutional and retail investor sentiments are at a high level not seen in over two years. However, he believes the current bullish narrative is challenging to embrace entirely due to growth’s fundamental view. One factor investors should consider is that student loan payments will resume in the fall, affecting consumers’ disposable income. Since the beginning of the pandemic in March 2020, student loan payments have been paused.

10 basis points decreased the lending rates for 1-year and 5-year terms in China, but many investors thought this action was insufficient. The state council meeting conducted on Friday did not result in any other significant measures being taken, leading to further disappointment. Societe Generale had forecasted a reduction of 15 basis points in the 5-year rate, which is an indicator for mortgage rates.

The Hang Seng HSI index in Hong Kong experienced a decrease of 1.5%.

Alibaba, the prominent Chinese internet company, has made headlines by announcing that its CEO and chairman will be resigning to focus on the cloud division. Additionally, the company revealed that Joseph Tsai, the owner of the Brooklyn Nets, will replace them as the new chairman.

There were updates on the economy given on Tuesday. These updates included details on the number of new housing projects that began. There was a growth of 21.7% in May, following a decrease of 2.9% in April (which was later amended). Moreover, the number of building permits issued in May rose 5.2%.

John Williams, who is the president of the Federal Reserve Bank of New York, and Michael Barr, the Vice Chair for Supervision at the Fed, are planning to have a discussion on Tuesday. The next day, Jerome Powell, the Chairperson of the Fed, is set to testify before Congress twice a year.

Companies In Focus

• During pre-market trading, the shares of Alibaba Group Holding Ltd, known as BABA, decreased by 2.1%. This was due to an announcement by the Chinese e-commerce firm about the resignation of Daniel Zhang as the chairman and CEO. However, Zhang will still supervise the cloud business, which will be separated from the main company.
• The Chinese electric car producer, NIO Inc., faced a reduction of more than 2% due to the recent drop in China’s stock exchange. This decline in US recorded stocks took place after Goldman Sachs decreased their estimates for China’s economic growth and the People’s Bank of China decided on a decrease in lending rates that were less than anticipated, leading to some dissatisfaction.
• On Friday, WeWork Inc. (WE, -8.17%) experienced a 5% decline in its stock value due to the outcome of a shareholder vote in support of a reverse stock split, as confirmed in a filing submitted to the Securities and Exchange Commission.
• Before the market opens, there has been a rise of more than 1.5% in the value of SPCE shares belonging to Virgin Galactic Holdings Inc. This momentum has continued from the previous week. The company’s main focus is on providing space travel services and is preparing for its first commercial voyage set to take place towards the end of this month.