Market Reaction: Weak China Data Causes Slip in U.S. Stock Futures

The U.S. stock index futures fell on Tuesday, reflecting a cautious market sentiment following the release of underwhelming Chinese international trade figures for July.

Bank stocks grabbed attention after Moody’s Investor Service announced that it was considering downgrading its credit ratings for six significant U.S. banks.

How are stock-index futures trading

• The S&P 500 ES00 futures underwent a fall of 34 points, equating to a 0.7% reduction, which resulted in the level reaching 4,503.75.
• The Dow Jones Industrial Average’s futures YM00 have experienced a drop of 264 points, indicating a 0.7% reduction, lowering its total to 35,290.
• Nasdaq 100 NQ00 futures saw a decline of 123.75 points, amounting to a decrease of 0.8%, resulting in a drop to 15,361.75.

On Monday, the Dow Jones Industrial Average saw a 408 points increase, equivalent to 1.2%. At the same time, the S&P 500 experienced a 0.9% rise and there was a 0.6% hike in the Nasdaq Composite.

What’s driving markets

Concerns were spreading throughout global markets, which resulted in a decrease in US equity index futures, due to disappointing trade data from China. This only heightened the existing fears about a slowing global economy.

China recorded an all-time low in exports, with a year-on-year drop of 14.5% up until July, representing the most significant fall since the onset of the COVID-19 pandemic in February 2020. There was also a considerable decrease in imports by 12.4%, a rate that exceeded previous predictions.

Jim Reid, a strategist at Deutsche Bank, remarked on recent reports underscoring that the world’s second biggest economy is undergoing a slump due to diminishing worldwide demand and a local economic downturn.

Assets reliant on China’s demand saw a decline, with industrial commodities like crude oil CL and copper HG00 falling. Stocks in mining companies listed in London also faced pressure.

Investments deemed secure were performing better, as indicated by the rise in dollar value and the increasing attractiveness of government bonds to investors. This in turn resulted in a decline in Treasury yield rates.

The ambiance was additionally affected by the potential demotion of six significant U.S. banks by Moody’s. This amplified concerns over the consistency of the financial sector, following the substantial rise in interest rates since March 2022.

The income report for the second quarter is still in progress, with various companies presenting their data. Some of these include UPS, Barrick Gold, Eli Lilly, and Under Armour, who will share their reports before the stock market opens. Super Micro Computer and Lyft plan on disclosing their financial numbers after the market has closed for the day.

The information showed a 4.1% reduction in the U.S. trade deficit, bringing it down to $65.5 billion in July.

Patrick Harker, president of the Philadelphia Federal Reserve Bank, hinted that policymakers may be at a point where they can afford to wait and keep the rates stable.

Companies in focus

• Paramount Global’s shares, PARA, saw a 4% surge in premarket trading, following the media company’s report of adjusted profits surpassing expectations. In addition, the firm announced the completion of Simon & Schuster’s sale to KKR for a sum of $1.6 billion.
• After an earnings report revealed a 30% decline in annual revenue, plant-based meat substitute producer, Beyond Meat Inc. BYND, experienced a 16% plunge in its value.
• Eli Lilly & Co. LLY’s share value surged by 9.0% to an all-time high during Tuesday’s premarket trading after they revealed their second-quarter earning results that surpassed projections. This uplifted their full-year outlook significantly, largely due to the $579 million they garnered from the sale of Baqsimi rights.
• United Parcel Service Inc. (UPS) experienced a significant drop in its shares on Tuesday, plunging to the lowest level in six weeks. This drop came on the heels of its second-quarter earnings report, which fell short of expected revenues. The delivery giant also revised its yearly forecast downwards, attributing it to the impact of labor negotiations on package deliveries.