U.S. Stocks May Move To The Downside In Early Trading

The major U.S. index futures are currently pointing to a modestly lower open on Tuesday, with stocks likely to move to the downside after ending the previous session mixed.

Ongoing concerns about the U.S. debt ceiling and a potential default may weigh on Wall Street following a meeting between President Joe Biden and House Speaker Kevin McCarthy, R-Calif., on Monday.

A statement from Biden described the meeting as “productive” and said he “reiterated once again that default is off the table.”

“While there are areas of disagreement, the Speaker and I, and his lead negotiators Chairman McHenry and Congressman Graves, and our staffs will continue to discuss the path forward,” Biden said.

Trading activity may remain subdued, however, as traders await more concrete developments regarding raising the debt ceiling.

Later this week, the Commerce Department’s report on personal income and spending is likely to be in focus, as it includes a reading on inflation said to be preferred by the Federal Reserve.

The minutes of the Fed’s latest monetary policy meeting are also likely to attract attention, as traders look for additional clues on the outlook for interest rates.

U.S. stocks turned in a mixed performance on Monday with technology shares outperforming the broader market.

Investors largely refrained from making significant moves as they awaited updates on debt ceiling negotiations.

The major averages closed mixed. The Dow slipped after a slightly positive start but stayed weak throughout the rest of the session and ended with a loss of 140.05 points or 0.4 percent at 33.286.58.

The S&P 500 settled at 4,192.63, up 0.65 points or less than a tenth of a percent, while the tech-heavy Nasdaq climbed 62.88 points or 0.5 percent to 12,720.78.

Treasury Secretary Janet Yellen said on Sunday that the likelihood of the Treasury paying all U.S. bills by June 15th is quite low.

Hawkish comments from a few Federal Reserve officials have raised concerns about the outlook for interest rates. St. Louis Fed President James Bullard said he backed two more increases.

Minneapolis Fed President Neel Kashkari said if the central bank does pause, it should signal tightening isn’t over.

Investors also seemed to wait for some key economic data this week. A report on personal income and spending and the minutes of the Fed’s latest monetary policy meeting are due this week.

Commodity, Currency Markets

Crude oil futures are jumping $1.02 to $73.07 a barrel after rising $0.36 to $72.05 a barrel on Monday. Meanwhile, after slipping $4.40 to $1,977.20 in the previous session, gold futures are falling $13.80 to $1,963.40 an ounce.

On the currency front, the U.S. dollar is trading at 138.68 yen compared to the 138.60 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0764 compared to yesterday’s $1.0813.

Asia

Asian stocks ended mostly lower on Tuesday as growing China-U.S. tensions and hawkish Fed comments overshadowed optimism related to U.S. debt ceiling talks.

U.S. President Joe Biden and House Speaker Kevin McCarthy said they held productive talks but there was no agreement on how to raise the government’s $31.4 trillion debt ceiling.

Gold prices fell as the dollar index edged up on hawkish comments from Federal Reserve Bank of St. Louis President James Bullard and his Minneapolis colleague Neel Kashkari. Oil prices were little changed after settling higher on Monday.

Chinese markets fell sharply amid fears of a resurgence in China-U.S. trade tensions after China banned U.S. chip maker Micron from selling its products to Chinese companies working on key infrastructure projects.

Growth concerns also weighed after recent economic data suggested that a post-COVID rebound in the country was running out of steam.

China’s Shanghai Composite Index tumbled 1.5 percent to 3,246.34, while Hong Kong’s Hang Seng Index closed 1.3 percent lower at 19,431.25.

Japanese shares dropped from a 33-year high to snap an eight-day winning streak on optimism over the Bank of Japan maintaining its ultra-dovish policy.

The Nikkei 225 Index slipped 0.4 percent to 30,957.77, while the broader Topix ended 0.7 percent lower at 2,161.49. Tech stocks led losses, with Advantest, Tokyo Electron and Screen Holdings falling 2-3 percent. Nippon Paper Industries soared 15 percent after Nomura upgraded the stock to “buy.”

Japanese manufacturing activity expanded for the first time in seven months in May, while growth in the services sector hit a record high, a survey showed earlier in the day.

Seoul stocks eked out modest gains after a central bank survey showed consumer sentiment in the country improved in May to the highest level in a year. The Kospi rose 0.4 percent to 2,567.55.

Australian markets finished marginally lower after data showed manufacturing sector in the country saw a second consecutive month of decline in April.

Falling bullion prices pulled down gold miners, with Northern Star Resources and Newcrest Mining sliding 1-2 percent. National carrier Qantas fell 2.2 percent despite forecasting a record annual profit for fiscal 2023.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index finished 0.4 percent lower at 11,944.20.

Europe

European stocks are mostly lower on Tuesday after a survey showed the Eurozone manufacturing sector contraction deepened to hit a 36-month low in May due to weak demand and a decrease in selling prices.

Elsewhere, British manufacturing and services PMIs for May surprised to the downside.
U.S. debt ceiling worries and signs of increasing China-U.S. tensions have also served to keep underlying sentiment cautious.

The pan European STOXX 600 Index was down 0.3 percent at 467.35 after ending flat with a positive bias on Monday.

The German DAX Index slipped 0.2 percent and France’s CAC 40 Index fell over 1 percent, while the U.K.’s FTSE 100 Index was little changed with a positive bias.

Julius Bar, a Swiss private lender, has plunged after its quarterly results came in below estimates.

British meat producer has jumped after reporting higher annual profit.

Flooring specialist Topps Tiles has moved higher after posting record sales, driven by “nationwide store coverage, world-class customer service and strong omnichannel capability”.

Societe Generale has rallied after the French lender confirmed the launch of a global employee share ownership program.

U.S. Economic Reports

Dallas Federal Reserve President Lorrie Logan is due to give welcome remarks before the Technology-Enabled Disruption Conference: Uncertainty and Prospects for Disruptive Investments at 9 am ET.

At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of April. Economists expect new home sales to decrease to an annual rate of 670,000 in April from a rate of 683,000 in March.

The Treasury Department is due to announce the results of this month’s auction of $42 billion worth of two-year notes at 1 pm ET.