Tuesday July 5th

U.S. stock index futures were lower early on Tuesday morning after the major averages finished another losing week. Stock futures tied to the Dow Jones Industrial Average fell 332 points, or about 1%. S&P 500 futures dipped 1.1%, and Nasdaq 100 futures shed about 1.4%. Concerns about economic growth are hanging over investors as the U.S. market looks to recover after a rough first half to the year. U.S. Treasury Secretary Janet Yellen and China’s Vice Premier Liu He held a virtual call on Monday stateside to discuss macroeconomic issues. The benchmark 10-year Treasury yield has declined in recent days even as the Federal Reserve has pledged to aggressively fight inflation. The 10-year yield is now trading close to the 2-year yield, a recession indicator watched by many on Wall Street. “The US market is all about pricing in a slowdown, and pricing in the fact that the Fed is forced to hike rates into a slowdown,” Allianz chief economic advisor Mohamed El-Erian said on “Squawk Box.” Markets finished one of the worst halves in decades on Thursday, and major averages posted their fourth week of losses in five despite modest gains during Friday’s trading session. The outlook for the second half of the year is murky. Credit Suisse strategist Jonathan Golub said in a note to clients on Tuesday that he expects the U.S. to avoid a recession but cut his S&P 500 target for the end of the year to 4,300 from 4,900. The new target would mean Wall Street claws back about half of its losses from the first six months of the year. “Recessions are most accurately characterized by a meltdown in employment accompanied by an inability of consumers and businesses to meet their financial obligations. While we are currently experiencing a meaningful slowdown in economic growth (from extremely high levels), neither of the above conditions are present today,” Golub wrote. In this shortened holiday week, investors are looking ahead to the release of June jobs report data on Friday. According to Dow Jones estimates, job growth likely slowed in June with 250,000 nonfarm payrolls added, down from 390,000 in May. Economists surveyed expect the unemployment rate to hold at 3.6%. This week’s economic calendar also includes Wednesday’s release of minutes from the Federal Reserve’s latest meeting. May factory orders are expected for Tuesday, with earnings from WD-40 and Levi Strauss scheduled for Friday. The U.S. stock market was closed on Monday for the July 4 holiday, but trading in Europe was choppy ahead of the market open in New York. The Euro slid to a 20-year low against the dollar on Tuesday. Last week, despite modest Friday gains, the Dow dipped 1.3%, the S&P 500 dropped 2.2%, and the Nasdaq fell 4.1%. Shares in the Asia-Pacific mostly rose on Tuesday as the Reserve Bank of Australia hiked interest rates in line with expectations. South Korea’s Kospi increased 1.8% to close at 2,341.78, and the Kosdaq advanced 3.9% to 750.95. The Nikkei 225 in Japan gained about 1% to close at 26,423.47, while the Topix index rose 0.5% to1,879.12. Hong Kong’s Hang Seng index pared earlier gains to rise 0.43% in its final hour of trade. Mainland China markets bucked the trend. The Shanghai Composite closed fractionally lower at 3,403.57, and the Shenzhen Component was down 0.408% at 12,973.11. Brent oil prices slipped on Tuesday, reversing earlier gains, as concerns of a possible global recession curtailing fuel demand outweighed supply disruption fears, highlighted by an expected production cut in Norway. Brent crude fell 38 cents, or 0.3%, to $113.12 a barrel. U.S. West Texas Intermediate (WTI) crude slid 50 cents, or 0.46%, to $107.93. There was no settlement for WTI on Monday because of the Independence Day public holiday in the United States. Gold prices were largely unchanged on Tuesday as investors stayed away due to a softening inflation outlook and impending interest rate hikes from top central banks. Spot gold was flat at $1,809.45 per ounce, as of 0305 GMT. U.S. gold futures rose 0.5% to $1,809.90.