Monday August 16th

16-08-2021

Dow futures fall more than 100 points to start the week as China’s economic growth slows

U.S. stock index futures slipped Monday after data showed Chinese economic growth slowing more than expected. Dow Jones Industrial Average futures fell 118 points, or 0.3%. S&P 500 futures shed and Nasdaq-100 futures each dipped about 0.3%. The Dow and S&P 500 closed last week at records. China’s retail sales increased by 8.5% in July year-over-year, below the 11.5% forecast from economists polled by Reuters. Online sales gained just 4.4% for the month. On the manufacturing sector in the country, industrial production increased by 6.4%, below the 7.8% consensus estimate. The country’s National Bureau of Statistics noted an impact from Covid and domestic flooding, saying the country’s “economic recovery is still unstable and uneven.” “Delta driven slowdown grips China,” wrote CNBC’s Jim Cramer in a tweet. “Not sure of impact here yet.” Shares of stocks linked to a fast-recovering economy were weak in premarket trading. Shares of Caterpillar, Freeport-McMoRan and Nucor dipped. Tesla’s stock retreated in the premarket after the National Highway Traffic Safety Administration announced a formal probe into the electric vehicle maker’s Autopilot partially automated driving system. Futures also pulled back amid talk of the Federal Reserve’s so-called taper. There’s growing support within the central bank to announce a tapering of its bond purchases in September and begin the reduction in buying a month or so after. Interviews with officials along with their public comments show growing support for a faster taper timeline than markets had expected a month ago. The yield on the benchmark 10-year Treasury note dipped slightly to 1.277%. Bond yields fall as their prices rise. The Dow ended last week at 35,515.38, a record close, while the S&P 500 finished Friday at 4,468.00 to notch its own best-ever finish. The blue-chip Dow and the S&P 500 rounded out the week with muted gains of 0.8% and 0.7%, respectively, amid light summertime trading volumes. The tech-heavy Nasdaq Composite underperformed week, down just under 0.1%. The major stock indexes for much of the last month have ground to new records on the back of robust corporate earnings results. The S&P 500 has closed at a record high 48 times this year out of 155 trading days, or 31% of the time — the most frequent closing highs on record back to 1950. Eighty-seven percent of S&P 500 companies have reported positive earnings per share surprises for the second calendar quarter, according to FactSet as of Friday. If 87% is the final percentage, it will mark the highest percentage of S&P 500 companies reporting positive EPS surprises since FactSet began tracking this metric in 2008. “These are the dog days of August, and low volume and directionless volatility are the order of the moment with 2Q21 earnings season mostly behind us,” Raymond James’ Tavis McCourt said in a note. Investors digested mixed economic data last week. Perhaps the most notable reading was Wednesday’s softer-than-expected inflation report, which showed consumer prices minus energy and food rose less than expected in July. Meanwhile, the Labor Department said Thursday that weekly jobless claims came in at 375,000 last week, matching estimates and declining for a third straight week. The University of Michigan’s sentiment read for August printed at just 70.2, the weakest since December 2011, and producer prices came in hotter than expected. Upcoming economic data includes an update on retail sales on Tuesday, as well as housing starts and the release of the Federal Reserve’s latest meeting minutes on Wednesday. Asia-Pacific stocks slipped on Monday as investors reacted to the release of Chinese economic data for July. Mainland Chinese stocks closed mixed, with the Shanghai composite hovering marginally higher at 3,517.34 while the Shenzhen component shed 0.712% to 14,693.74. Hong Kong’s Hang Seng index declined 0.8% to close at 26,181.46. In Japan, the Nikkei 225 dropped 1.62% to close at 27,523.19, with shares of Fast Retailing and SoftBank Group falling more than 2% each. The Topix index shed 1.61% on the day to close at 1,924.98. South Korea’s markets were closed on Monday for a holiday. Oil prices fell more than 1% on Monday, dropping for a third session, after official data showed that refining throughput and economic activity slowed in China in an indicator that fresh COVID-19 outbreaks are crimping the world’s no.2 economy. Brent crude was down $1.01, or 1.4%, at $69.58 per barrel. U.S. oil fell by $1.08, or 1.6%, to $67.36 per barrel. Gold prices edged lower on Monday as the dollar held steady, although receding worries about early tapering by the Federal Reserve and concerns over the Delta coronavirus variant kept bullion near a one-week peak. Spot gold was down 0.2% at $1,775.06 per ounce by 0919 GMT, after hitting its highest since Aug. 6 at $1,782.40 earlier in the session. U.S. gold futures eased 0.1% to $1,776.70.