ISM manufacturing data due Tuesday morning
U.S. stock futures headed firmly lower on Tuesday, with markets set to kick off trade on a decidedly downbeat note following the increase of tariffs on $112 billion of Chinese goods, which went into effect over the weekend along with a corresponding increase of tariffs on U.S. goods headed to China.
The new trade barriers and a decline in China’s yuan currency highlight the uncertainties surrounding the escalating tariff tiff between the two economic superpowers that threatens to throw the rest of the world into recession, as U.S. markets reopen Tuesday following their closure Monday for the Labor Day holiday.
How are the markets faring?
Futures for the Dow Jones Industrial Average YMU19, -0.69% were headed 224 points lower, or 0.9%, to 26,182, those for the S&P 500 index ESU19, -0.55% were off 0.8% at 2,901.25, while Nasdaq-100 futures NQU19, -0.50% declined 0.8% to 7,630, a drop of 60.50 points.
Last week, the S&P 500 SPX, +0.06% saw a 2.8% rise, while the DowDJIA, +0.16% gained 3% — their strongest weekly advances since the week ended June 7. The Nasdaq Composite Index COMP, -0.13% rose 2.7% for its biggest weekly rise since the period ended June 21.
However, the major indexes logged their first losing month since May — and their second losing month of 2019. The S&P 500 saw a 1.8% monthly fall, the Dow declined 1.7% and the Nasdaq gave up 2.6%.
Trade tensions between the U.S. and China continue to be the main source of angst for markets at the start of September. Beijing filed a complaint with the World Trade Organization over U.S.’s increase in tariffs, which took effect over the weekend. Bloomberg News also reported on Monday that the parties are struggling to agree on what to discuss in trade talks.
Meanwhile, China’s yuan USDCNY, +0.0488% weakened Tuesday, nearing 7.2 to the dollar, after first breaching the psychologically important 7-level a month ago, when President Trump announced the latest round of tariffs on Chinese imports that were implemented Sunday. The yuan is seen by some currency traders as a reflection of the intensifying Sino-American trade war.
Meanwhile, concerns over Britain’s exit from the European Union under new Prime Minister Boris Johnson have increased. Johnson has threatened a snap election if a group in parliament succeed in blocking a so-called no-deal exit, which would result if Britain is unable to reach a separate trade agreement with the EU by the Oct. 31 deadline, being put forward on Tuesday.
“In summary, September is getting off to a negative start as money flows to safe haven investments,” said Peter Cardillo, chief market economist at Spartan Capital Securities, in a daily research note.
Against that backdrop, Wall Street also was watching coming data on manufacturing to gauge the health of the U.S. economy amid the continuing tariff woes. Markit’s purchasing manager’s index data for August is due at 9:45 a.m. Eastern Time, while the more closely watched manufacturing reading from the Institute for Supply Management is due at 10 a.m. Investors will be looking to see if those readings stay above 50, a reading that falls below that level indicates contraction.
Separately, a report of construction spending for July, also due at 10 a.m., will be watched for signs of vibrancy in the domestic economy.
“The ISM Mfg. Index and Construction Spending are in play. We see the manufacturing sector slipping further with index at 50.8, Construction Spending flat from its last reading,” Cardillo wrote.
Which stocks are in focus?
Chip stocks, which are seen as sensitive to trade tensions, were also under pressure, with Dow constituent Intel Corp. INTC, +1.15% down 1%, while fellow semiconductor firms Advanced Micro Devices Inc. AMD, +0.00% and Micron Technology Inc. MU, +1.34% fell 2% and 1.6%, respectively, in premarket action.
Shares of Concho Resources Inc. CXO, +0.66% were up 1.9% before the start of trade Tuesday, after the energy explorer announced a $1.5 billion share repurchase program, along with the sale of its assets in the New Mexico shelf to an affiliate of Spur Energy Partners LLC for $925 million.
How are other markets trading?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -0.01% fell to 1.48% in early Tuesday trade.
In commodities markets, the price of crude oil CLV19, -2.36% headed 2.2% lower at $54 a barrel, while the price of gold GCZ19, +0.82% gained 0.7% on Tuesday to about $1,540 an ounce. The ICE U.S. Dollar Index DXY, +0.38%, a measure of the U.S. currency against a basket of six major rivals, rose 0.3%.
In Asia, equities were mostly higher, as the China CSI 300 000300, +0.14% rose 0.1%, Japan’s Nikkei 225 NIK, +0.02% ending flat but in positive territory. Hong Kong’s Hang Seng HSI, -0.39% declined 0.4%. European stocks, meanwhile, fell, with the Stoxx Europe SXXP, -0.19% off 0.3%.