Economic Worries May Lead To Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to move to the downside following the mixed performance seen in the previous session.

Concerns about the outlook for the U.S. economy may weigh on the markets following yesterday’s disappointing manufacturing data.

While economic weakness could prompt the Federal Reserve to lower interest rates in the coming months, the central bank has signaled it plans to keep rates at elevated levels until there is greater confidence inflation is slowing.

A bigger than expected slowdown by the economy combined with high interest rates could prove troubling for stocks, which have recently reached record levels.

On Friday, the Labor Department is scheduled to release its closely watched monthly jobs report, which could have a significant impact on the outlook for the economy and interest rates.

Economists currently expect the report to show employment jumped by 190,000 jobs in May after climbing by 175,000 jobs in April, while the unemployment rate is expected to hold at 3.9 percent.

After a positive start and a subsequent retreat that resulted in a fairly long spell in negative territory on Monday, U.S. stocks recovered in afternoon trading and ended the day’s session on a mixed note.

The Nasdaq outperformed, settling at 16,828.67 with a gain of 93.65 points or 0.6 percent. The S&P 500 edged up 5.89 points or 0.1 percent to finish at 5,283.40, while the Dow ended down 115.29 points or 0.3 percent at 38,571.03.

Data showing a continued contraction in the nation’s manufacturing activity in the month of May hurt sentiment.

A report from the Institute for Supply Management said manufacturing activity in the U.S. unexpectedly contracted at a slightly faster rate in the month of May.

The ISM said its manufacturing PMI edging down to 48.7 in the month, from 49.2 in April. Economists had expected the index to inch up to 49.6.

The report also said the prices index slid to 57.0 in May from 60.9 in April, suggesting a slowdown in the pace of price growth.

On Wednesday, the ISM is scheduled to release a separate report on service sector activity in the month of May. The services PMI is expected to rise to 50.5 in May from 49.4 in April, with a reading above 50 indicating growth.

Data from the Commerce Department showed U.S. construction spending unexpectedly shrank in April amid declines in both private and public construction.

The report said construction spending dipped 0.1 percent to $2,099.0 billion from the revised estimate of $2,101.5 billion in March. Spending was expected to grow 0.2 percent after a 0.2 percent decrease in March.

Several stocks from financial and energy sectors ended sharply lower. Nvidia shares gained nearly 5 percent after the company unveiled next-generation AI chips.

Autodesk climbed about 4.6 percent. Moderna, Vertex Pharmaceuticals, Dollar Tree, Micron Technology, Starbucks, Biogen and Meta Platforms gained 2 to 4 percent.

Salesforce.com climbed about 2.75 percent. AstraZeneca, Warner Bros., Amazon, Merck, Boeing and American Express posted moderate gains.

Sirius XM, Walgreens Boots Alliancec, AMD, Old Dominion Freight Line and Baker Hughes ended sharply lower.

Commodity, Currency Markets

Crude oil futures are slumping $1.15 to $73.07 a barrel after plunging $2.77 to $74.22 a barrel on Monday. Meanwhile, after jumping $23.50 to $2,369.30 an ounce in the previous session, gold futures are falling $15 to $2,354.30 an ounce.

On the currency front, the U.S. dollar is trading at 154.82 yen compared to the 156.08 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0865 compared to yesterday’s $1.0904.

Asia

Asian stocks ended mixed on Tuesday, with Indian markets falling deep into the red as trends showed BJP falling below the majority mark in the Lok Sabha elections, contradicting the exit polls.

Losses elsewhere remained capped as weak U.S. data rekindled hopes for interest rate cuts by the Federal Reserve this year.

The U.S. dollar held steady against its major rivals in Asian trading after suffering large losses in the New York trading session overnight.

Gold was modestly lower, while oil prices fell more than 1 percent, adding to over 3 percent losses in the previous session on worries about increased supply later in 2024.

China’s Shanghai Composite Index rose 0.4 percent to 3,091.20 following mixed signals from key purchasing managers index data over the past two sessions.

Hong Kong’s Hang Seng Index edged up 0.2 percent to 18,444.11 after recent stimulus measures announced for the property sector.

Japanese shares fell for the first time in three sessions as a firm yen as well as a safety test scandal weighed on auto stocks.

The Nikkei 225 Index slipped 0.2 percent to 38,837.46, while the broader Topix Index closed 0.4 percent lower at 2,787.48. Toyota Motor gave up 1.3 percent and Honda Motor shed 2.2 percent.

Sony rose nearly 2 percent as speculation the electronics and media giant could acquire U.S. film studio Paramount Global faded.

Seoul stocks ended lower on profit taking after strong gains in the previous session. The Kospi slid 0.8 percent to 2,662.10. Financials lost ground, with KB Financial and Shinhan Financial falling 2.1 percent and 3.4 percent, respectively.

Official data revealed that South Korea’s headline inflation slowed to a 10-month low but remained above the central bank’s 2.0 percent target.

Australian markets ended slightly lower amid losses in heavyweight mining and energy stocks. The benchmark S&P/ASX 200 Index dipped 0.3 percent to 7,737.10 ahead of Q1 GDP data due on Wednesday. The broader All Ordinaries Index settled 0.4 percent lower at 7,994.10.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index inched up 0.1 percent to 11,880.54.

Europe

European stocks have edged lower on Tuesday as investors look ahead to Thursday’s European Central Bank meeting and the release of the all-important U.S. employment report on Friday for directional cues.

In economic news, Germany’s unemployment rate remained unchanged in April, according to the results of the labor force survey, published by Destatis earlier today. The unemployment rate held steady at adjusted 3.2 percent in April.

The number of unemployed decreased only 1,000 or 0.1 percent to 1.42 million. The jobless rate rose to 3.2 percent from 3.1 percent last year.

Elsewhere, data showed U.K. retail sales grew only moderately in May despite a strong bank holiday weekend.

According to data released by the British Retail Consortium, total retail sales grew 0.7 percent on a yearly basis compared to the 3.9 percent increase seen in the same period last year.

While the German DAX Index has slid by 0.6 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both down by 0.3 percent.

Oil majors BP, Shell, Eni and TotalEnergies have fallen as oil extended losses from a four-month low on worries about rising supply later in the year.

British American Tobacco has also moved lower. The cigarette maker said it expects first-half revenue and adjusted profit from operations to be down by low-single digits on an organic, constant currency basis.

Low-cost airline Wizz Air Holdings has also dropped despite revealing a 2.1 percent jump in passenger bookings and a slight increase in load factor for May.

Vistry Group has also dipped after it agreed to terms with Blackstone Real Estate and Regis Group for the acquisition of a portfolio of new build homes totaling a gross development value of approximately 580 million pounds.

Credit Agricole SA shares have also declined. The French lender announced that its unit Indosuez Wealth Management has finalized the acquisition of Bank Degroof Petercam. The financial terms of the deal were not released.

On the other hand, Danish shipping group Maersk has moved to the upside after raising its annual profit guidance.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of April at 10 am ET. Factory orders are expected to increase by 0.6 percent in April after jumping by 1.6 percent in March.

Also at 10 am ET, the Labor Department is due to release its report on job openings in the month of April. Job openings are expected to decrease to 8.340 million in April from 8.488 million in March.