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

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

16 Aug 2021

A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 5, 2021.

Andrew Kelly | Reuters

Futures contracts tied to the major U.S. stock indexes slipped on Monday after data showed the Chinese economy is slowing more than expected.

Dow Jones Industrial Average futures fell 106 points, or 0.3%. S&P 500 futures shed 0.3% and Nasdaq-100 futures dipped 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. China’s National Bureau of Statistics noted the Covid impact and domestic flooding, sayin 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 were lower.

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 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 yield on the benchmark 10-year Treasury note was last seen at 1.283%. Bond yields fall as their prices rise.

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.

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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.

The major stock indexes have for much of the last month ground to new records on the back of robust corporate earnings results.

Eighty-seven percent of S&P 500 companies have reported positive earnings per share surprises for the second calendar quarter. 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.

— With reporting by Evelyn Cheng.