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Stock-index futures point to lower start as growth, trade worries fester

U.S. stock futures indicated losses for Wall Street on Tuesday, as fresh concerns over the state of the global economy were set to greet investors returning from the long holiday weekend.

Earnings will also remain in focus, with a busy week ahead.

How are the benchmarks trading?
Dow Jones Industrial Average futures YMH9, -0.67%  fell 139 points, or 0.6%, to 24,551, while S&P 500 futures ESH9, -0.66%  dropped 15.35 points, or 0.6%, to 2,656. Nasdaq-100 NQH9, -0.71%  futures fell 52 points, or 0.8%, to 6,740.50.

Stocks closed higher for a fourth straight session on Friday. The Dow Jones Industrial Average DJIA, -0.59% rose 336.25 points, or 1.4%, to end at 24,706.35 for a weekly gain of 3%. The S&P 500 index SPX, -0.64% advanced 1.3% to 2,670.71, up 2.9% for the week. The Nasdaq Composite COMP, -0.73%  added 1% to 7,157.23, finishing out the week 2.7% higher. Most U.S. financial markets were closed Monday for the Martin Luther King Jr. Day holiday.

What’s driving markets?
After the country posted the slowest annual pace of annual growth — 6.6% — since 1990, President Xi Jinping reportedly convened a meeting of high-level Communist Party officials, urging them to be alert over “black swan” and “gray rhino” financial events in face of an economic slowdown. Trade tensions are partly to blame for the weak data.

Citing that weak data, President Donald Trump tweeted late Monday that China needs to “finally do a Real Deal and stop playing around,” when it comes to trade. But the two countries reportedly remain far apart on key issues such as theft of intellectual property, which the U.S. says China has engaged in for decades.

On Saturday, Trump said stock-rallying reports last week that the U.S. would ease tariffs on China were not correct, even as he said talks were “going very well.”

Potentially adding to trade tensions was a report that the U.S. plans to formally request from Canada the extradition of Huawei’s chief financial officer, Meng Wanzhou, over allegations she lied about the company’s dealings with Iran.

Meanwhile, on Monday, the International Monetary Fund cut its global growth forecast to 3.5% for 2019, from 3.7% in 2018 and from the 3.7% it predicted for 2019 back in October. Unveiling its forecasts at the World Economic Forum in Davos, Switzerland, the fund left its prediction for U.S. growth this year unchanged at 2.5%.

A partial government shutdown stretched into its 31st day on Tuesday, and there was little sign of the deadlock breaking. Democrats rejected Trump’s latest proposal to temporarily extend protections for some young immigrants brought to the country illegally as children, in exchange for $5.7 billion for his border wall.

The shutdown has caused a backlog of economic data, with only a smattering of reports due this week, including existing home sales, jobless claims and Markit manufacturing and services purchasing managers index data.

Opinion: These 3 leading economic indicators show no recession is coming

Which stocks are in focus?
Shares of Johnson & Johnson JNJ, -1.27% were up 0.2% in premarket action after the firm announced fourth-quarter results that surpassed analysts expectations for revenue and earnings.

Shares of IBM Corp. IBM, -0.10% were down 0.3% in light premarket trade, ahead of the company’s Tuesday evening earnings announcement.

Halliburton Co. HAL, -2.54% stock fell 1.4% before the bell Tuesday, even after the oil-services company reported fourth-quarter profit and revenue that beat Wall Street estimates.

Shares of Travelers Companies Inc. TRV, +0.15% were flat, after the insurer announced it beat analysts estimates for both sales and earnings in the fourth quarter.

Bunge Ltd. BG, -0.77% shares are trading 1.5% lower in premarket action Tuesday, after the agriculture and food business company announced that it’s full-year earnings would fall short of its previous guidance.

Read: Tech is ready to respond to Wall Street’s doubts, but don’t expect a holiday miracle

What are the analysts saying?
“U.S. stocks are poised to open lower, following the selloff seen in both Asia and Europe,” wrote Edward Moya, market analyst at Oanda, in a Tuesday research note.

“The selloff overnight was mainly driven on China concerns after President Xi warned of serious dangers, follow through on confirmation of slowing Chinese economic growth, and a possible escalation in tension between in the trade war as the U.S. seeks to extradite Huawei CFO,” he wrote.

Which data are traders watching?
At 10 a.m. Eastern Time, the National Association of Retailers will release its estimate of existing home sales for the month of December.

How are other markets trading?
Trade and growth worries weighed on Asia markets, with the Shanghai Composite Index SHCOMP, -1.18% sliding 1.4%. In Europe, stocks are lower, with the Stoxx Europe 600 falling 0.2%.

Crude oil CLG9, -2.06% dropped nearly 1.7% to $52.88 per barrel, while gold GCG9, -0.06% held steady and the U.S. dollar DXY, +0.12% ticked 0.1% higher.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya [4]

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya