U.S. Stock Futures Face Pressure Amidst Global Economic Uncertainty

U.S. Stock Futures Show Signs of Recovery After an Initial Decline

In the early hours of Tuesday, U.S. stock index futures exhibited a partial rebound, though they remained in negative territory, as surging bond yields countered bleak economic reports from China and Europe.

Here’s how stock-index futures were faring:

S&P 500 futures (ES00) dipped by 6 points, or 0.1%, to 4,514.
Dow Jones Industrial Average futures (YM00) fell by 20 points, or 0%, to 34,862.
Nasdaq 100 futures (NQ00) eased by 46 points, or 0.3%, to 15,470.

Looking back, on Friday, the Dow Jones Industrial Average (DJIA) rose by 116 points, or 0.33%, closing at 34,838, while the S&P 500 (SPX) increased by 8 points, or 0.18%, ending at 4,516, and the Nasdaq Composite (COMP) dropped by 3 points, or 0.02%, to finish at 14,032. U.S. markets were closed on Monday in observance of Labor Day.

Market Drivers:

As U.S. traders returned from the Labor Day holiday, global markets appeared to adopt a risk-averse stance, influenced by disappointing economic news from China, the world’s second-largest economy.

A survey by Caixin indicated that China’s service sector experienced its slowest expansion in eight months in August, raising concerns about the nation’s post-pandemic recovery.

Additionally, a survey in the eurozone indicated that output within the bloc contracted at its swiftest pace in nearly three years.

These developments led to a downturn in sentiment, affecting U.S. equity index futures. Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, noted that the data overshadowed the relief stemming from the struggling property giant, Country Garden, managing to make key interest payments on its debt, temporarily easing concerns about financial sector contagion.

The rise in Treasury yields amid concerns about recent increases in oil prices, which, although slightly down on Tuesday, may reignite inflationary pressures, added to the grim tone in sovereign debt markets.

Stephen Innes, Managing Partner at SPI Asset Management, highlighted the potential repercussions of surging oil prices on the August consumer price index reports, which present a new challenge for central banks in their efforts to control inflation levels.

Moreover, the narrowing probability of an impending recession, as indicated by Goldman Sachs, added to market dynamics. The odds of a recession in the next 12 months decreased to 15%, down from 20% in July and 35% in March. While a slowdown may occur, it is expected to be “shallow and short-lived,” according to Jan Hatzius, Chief Economist at Goldman Sachs.

In terms of economic updates, the release of July factory orders is scheduled for 10 a.m. Eastern on Tuesday.

Companies in the Spotlight:

Blackstone Inc. (BX) saw a 3% rise in premarket trading.
Airbnb Inc. (ABNB) witnessed a 5% increase after S&P Dow Jones Indices announced their inclusion in the S&P 500 index, effective before the start of trading on September 18th.