Futures Pointing To Modestly Lower Open On Wall Street

The major U.S. index futures are currently pointing to a modestly lower open on Tuesday, with stocks likely to give back ground after moving sharply higher last week.

Concerns about the outlook for the global economy may weigh on Wall Street following the release of disappointing Chinese and European data.

Chinese services activity expanded at the slowest pace in eight months in August, a private-sector survey showed earlier today.

Business activity in the euro zone weakened further in August as the economic downturn extended from manufacturing to the services sector.

HCOB’s final Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, dropped to 46.7 in August from July’s 48.6, marking the lowest level since November 2020.

The Institute for Supply Management is scheduled to release its report on U.S. service sector activity in the month of August on Wednesday.

The ISM’s services PMI is expected to edge down to 52.4 in August from 52.7 in July, although a reading above 50 would still indicate growth in the sector.

Stocks moved mostly higher in early trading on Friday but quickly gave back ground and showed a lack of direction over the remainder of the session. The major averages pulled back off their early highs and spent much of the day lingering near the unchanged line.

The Dow managed to spend most of the day in positive territory before closing up 115.80 points or 0.3 percent at 34,837.71. The S&P 500 also rose 8.11 points or 0.2 percent to 4,515.77, while the Nasdaq edged down 3.15 points or less than a tenth of a percent to 14,031.81, snapping a five-day winning streak.

Nonetheless, the major averages all posted strong gains for the week. While the Nasdaq spiked 3.3 percent, the S&P 500 surged 2.5 percent and the Dow jumped by 1.4 percent.

The lackluster performance on Wall Street came following the release of a mixed employment from the Labor Department.

While the closely watched report showed modestly stronger than expected job growth in the month of August, the report also showed an unexpected increase in the unemployment rate.

The Labor Department said employment climbed by 187,000 jobs in August compared to economist estimates for the addition of 170,000 jobs.

Meanwhile, the report said the unemployment rate climbed to 3.8 percent in August from 3.5 percent in July. Economists had expected the unemployment rate to remain unchanged.

With the unexpected increase, the unemployment rate reached its highest level since hitting a matching rate in March 2022.

The advance by the unemployment rate came as the size of the labor force surged by 736,000 persons, while the household survey measure of employment rose by 222,000 persons.

The increase in the unemployment rate added to optimism about the Federal Reserve leaving interest rates unchanged later this month, but traders continued to express some uncertainty about future meetings.

“An uptick in the unemployment rate and moderation of payroll and wage growth mean the Fed is very likely to hold their policy rate steady at the decision later this month,” said Bill Adams, Chief Economist for Comerica Bank.

However, he added, “A rate hike is still possible at the Fed’s November 1 decision if some combination of wage growth, economic growth, or inflation surprise to the upside between now and then.”

CME Group’s FedWatch Tool is indicating a 93.0 percent chance the Fed will leave rates unchanged this month but still indicates a 33.9 percent chance of a rate hike in November.

In other economic news, the Institute for Supply Management released a report showing a slowdown in the pace of contraction in U.S. manufacturing activity.

The ISM said its manufacturing PMI rose to 47.6 in August from 46.4 in July, although a reading below 50 still indicates a contraction. Economists had expected the index to inch up to 47.0.

Despite the lackluster performance by the broader markets, computer hardware stocks moved sharply higher on the day, resulting in a 4.0 percent spike by the NYSE Arca Computer Hardware Index.

Dell Technologies (DELL) posted a standout gain, with the computer company soaring by 21.3 percent after reporting better than expected fiscal second quarter results.

Energy stocks also showed a substantial move to the upside, moving sharply higher along with the price of crude oil.

With crude for October delivery jumping $1.92 to $85.55 a barrel, the Philadelphia Oil Service Index surged by 3.1 percent and the NYSE Arca Oil Index shot up by 2.1 percent.

Steel, financial and housing stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are slipping $0.29 to $85.26 a barrel after surging $1.92 to $85.55 a barrel last Friday. Meanwhile, after inching up $1.20 to $1,967.10 an ounce in the previous session, gold futures are falling $12.30 to $1,954.80 an ounce.

On the currency front, the U.S. dollar is trading at 147.47 yen compared to the 146.47 yen it fetched on Monday. Against the euro, the dollar is valued at $1.0721 compared to yesterday’s $1.0796.

Asia

Asian stocks fell on Tuesday as weak Chinese services data revived concerns about growth and spurred risk aversion.

China’s service sector grew at the slowest pace in eight months in August largely due to weaker new business.

The Caixin services Purchasing Managers’ Index slipped more-than-expected to 51.8 from 54.1 in July. The expected score was 53.6.

The dollar traded close to three-month highs in Asian trading and gold was little changed, while oil prices slipped after recent strong gains.

China’s Shanghai Composite Index fell 0.7 percent to 3,154.37 on concerns about a feeble economic recovery.

Hong Kong’s Hang Seng Index tumbled 2.1 percent to 18,456.91. Property developers led the retreat as concerns about debt defaults persisted.

Japanese shares eked out modest gains to close at a one-month high as a weaker yen offset government data showing the weakest household spending in more than two years.

The Nikkei 225 Index rose 0.30 percent to 33,036.76, marking a seven-day winning streak and closing above the psychological 33,000 level for the first time in more than a month.

The broader Topix Index settled 0.2 percent higher at 2,377.85, logging a seventh straight day gain.

JFE Holdings slumped 6.1 percent after the steel giant’s board approved a fundraising plan through a public share offering.

Seoul stocks ended little changed, with the Kospi ending marginally lower at 2,582.18 after data showed inflation in the country accelerated much faster than estimates in August on the back of higher energy costs.

Australian markets ended on a subdued note as the Reserve Bank of Australia held rates steady for the third straight month, as widely expected, but warned of further monetary tightening.

The benchmark S&P ASX 200 Index slipped 4.50 points to 7,314.30, while the broader All Ordinaries Index ended down 8.90 points at 7,516.80.

Banks and gold miners led losses. Westpac Banking Corp dropped 1.4 percent after the corporate regulator said it was taking the lender to court over its alleged failure to respond to customers’ financial hardship notices.

Europe

European stocks are turning in a mixed performance on Tuesday as weak data from China and the euro area has fueled concerns about slowing global growth.

Chinese services activity expanded at the slowest pace in eight months in August, a private-sector survey showed earlier today.

Business activity in the euro zone weakened further in August as the economic downturn extended from manufacturing to the services sector.

HCOB’s final Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, dropped to 46.7 in August from July’s 48.6, marking the lowest level since November 2020.

Separately, an ECB survey showed consumer expectations for euro zone inflation three years ahead rose to 2.4 percent in July from 2.3 percent in June, above the ECB’s 2 percent target.

The U.K. services PMI dropped to 49.50 from 51.50 in July, marking the lowest reading since January.

Euro zone producer prices fell for a seventh consecutive month in July, possibly offering some comfort to the European Central Bank, which meets next week to decide on rates.

While the U.K.’s FTSE 100 Index is up by 0.2 percent, the German DAX Index and the French CAC 40 Index are both down by 0.1 percent.

ABN AMRO has fallen after the Dutch Bank said it intends to appoint current interim Chief Financial Officer Ferdinand Vaandrager permanently.

Meanwhile, Swedish builder Skanska has rallied after winning an $834 million contract for a highway improvement project in the U.S.

Celadon Pharma has also jumped after the cannabis-based pharma firm signed a deal to sell its cannabis product with a second U.K. pharmaceutical company customer.

Headlam, a floorcoverings distributor, has also moved to the upside after reporting higher first-half revenue and backing its FY view.

Renault Group has also gained. The initial public offering of Ampere electric vehicle division could get a valuation of up to 10 billion euros ($10.8 billion), CEO Luca de Meo said.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of July at 10 am ET. Factory orders are expected to tumble by 2.6 percent in July after surging by 2.3 percent in June.