A trader works on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, USA, 5 August 2021.
Andrew Kelly | Reuters
Futures contracts pegged to major U.S. stock indices slipped Monday after data showed that Chinese economic growth is slowing more than expected.
The Dow Jones Industrial Average futures fell 120 points, or about 0.3%. S&P 500 futures fell and Nasdaq 100 futures fell about 0.3% each. The Dow and S&P 500 closed last week at record highs.
China’s retail sales rose 8.5% yoy in July, below the 11.5% forecast by economists polled by Reuters. Online sales only increased 4.4% for the month. In the country’s manufacturing sector, industrial production rose 6.4%, below the consensus estimate of 7.8%.
The country’s National Bureau of Statistics noted the impact of Covid and domestic flooding, saying the country’s “economic recovery is still unstable and uneven”.
“Delta-driven slowdowns hit China,” CNBC’s Jim Cramer wrote in a tweet. “Not sure about the effects here yet.”
Stocks of stocks associated with a rapidly recovering economy were weak in pre-market trading. Caterpillar, Freeport-McMoRan and Nucor stocks fell.
Futures also pulled back amid growing support from the Federal Reserve, to announce a tapering of their bond purchases in September and begin tapering purchases about a month later. Interviews with central bank officials along with their public comments show growing support for a faster timeline for the rejuvenation than markets expected a month ago.
The yield on the ten-year benchmark government bond fell to 1.268%. Bond yields fall when their prices rise.
Tesla shares fell in the premarket after the National Highway Traffic Safety Administration announced a formal investigation into the electric vehicle maker’s semi-automated driving system, Autopilot.
The Dow closed at 35,515.38 a record high last week while the S&P 500 closed at 4,468.00 on Friday to hit its own best ever close.
The blue-chip Dow and the S&P 500 rounded off the week with subdued gains of 0.8% and 0.7%, respectively, with slight trading volumes in the summer. The technology-heavy Nasdaq Composite performed worse for the week with a minus of just under 0.1%.
The major stock indices hit new record highs last month on the back of robust corporate earnings. The S&P 500 closed at a record high 48 times out of 155 trading days or 31% of the time this year – the most frequent closing highs since 1950.
According to Friday’s FactSet, 77 percent of the S&P 500 companies reported positive surprises in earnings per share for the second calendar quarter. If 87% is the final percentage, this is the highest percentage of the S&P 500 companies reporting positive EPS surprises since FactSet started tracking this metric in 2008.
“These are August dog days and low volume and directionless volatility are the order of the day as the 2Q21 profitable season is largely behind us,” said Raymond James’ Tavis McCourt in a note.
Investors digested mixed economic data last week.
Perhaps the most notable reading was Wednesday’s weaker-than-expected inflation report, which showed that consumer prices, excluding energy and food, rose less than expected in July. Meanwhile, the Department of Labor said Thursday that weekly jobless claims were 375,000 last week, up by estimates and declining for the third straight week.
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The University of Michigan sentiment for August was just 70.2, its weakest since December 2011, and producer prices were hotter than expected.
Upcoming economic data includes an update on Tuesday’s retail sales, as well as housing starts and the release of the Federal Reserve’s latest minutes of meetings on Wednesday.
Investors expect quarterly earnings reports this week from major retailers including Home Depot, Walmart, Target and Lowe’s.
– With reporting from Evelyn Cheng.