US Futures Decline Amid Economic Growth Concerns
By Johann M Cherian and Purvi Agarwal
Recently, futures linked to Wall Street's main indexes faced a downward trend as investors expressed apprehension regarding the U.S. economic landscape. These worries kept many on the sidelines, particularly as vital labor data approached.
In the preceding trading session, major indexes experienced their largest single-day loss since early August, primarily driven by a sell-off in technology stocks. This shift came during a period that is typically recognized for its weak performance in U.S. equities.
Underlying Factors Impacting Market Sentiment
Investor sentiment was further clouded by reports indicating a contraction in manufacturing activity. This followed previous signs of diminishing labor demand, which had already prompted a significant downturn in global markets.
"The weak ISM print did not help, and with crucial employment figures slated for release, it's understandable why some positions were liquidated," stated Arun Sai, a senior multi-asset strategist.
Upcoming Labor Data and Market Reactions
Traders are now closely monitoring the Job Openings and Labor Turnover Survey, set for release soon. This report, followed by the non-farm payrolls report, is anticipated to provide insights into the probability and extent of upcoming interest rate adjustments by the Federal Reserve.
According to the latest projections from CME Group's FedWatch Tool, there's a 61% chance that the Federal Reserve will reduce interest rates by 25 basis points, while the likelihood of a bigger 50 basis point cut has grown to 39%, up from roughly 31% the day before.
Market Movements and Key Stocks
Data regarding July factory orders, along with insights from the Fed's Beige Book survey, are also expected to illuminate market trends further. As of the early morning hours, Dow E-minis were down by 61 points, or 0.15%. Meanwhile, the S&P 500 E-minis and Nasdaq 100 E-minis reflected similar downward movements.
The AI-driven semiconductor sector took a significant hit in the past session, with the Philadelphia SE Semiconductor index recording a remarkable 7.8% decline, marking its steepest single-day drop since the onset of the pandemic.
Nvidia sustained a 2% drop in premarket trading following a report about the U.S. Department of Justice looking into the company’s antitrust practices. This was amidst a dramatic 10% drop in the previous session, leading to a staggering loss of $279 billion from the company’s market capitalization—the largest ever recorded in one day for a U.S. firm.
Performance of Other Companies
Other notable stocks in the technology sector, including Tesla, Apple, and Microsoft, also experienced declines, with drops of 1.1%, 0.9%, and 0.7% respectively. Additionally, Zscaler generated concern when it projected lower-than-expected revenues and profits for fiscal 2025, resulting in a 15% decrease in share price.
Dollar Tree saw a dramatic 12% drop in its stock value after revising its annual sales and profit estimates downwards. Similarly, Hormel Foods, recognized as the maker of Skippy peanut butter, reported a 5% decline after moderating its annual sales forecast.
Frequently Asked Questions
1. What are the main factors contributing to the decline in U.S. futures?
Concerns regarding U.S. economic growth, poor manufacturing data, and upcoming labor reports have caused uncertainty among investors.
2. How did technology stocks perform recently?
Technology stocks faced significant selling pressure, leading to major losses, including a notable drop for Nvidia.
3. What is the forecast for interest rates by the Federal Reserve?
There is a 61% chance of a 25 basis point cut in the upcoming interest rate decision, with increasing probabilities for a larger reduction as well.
4. How did Dollar Tree respond to its financial outlook?
Dollar Tree adjusted its annual sales and profit forecasts downwards, resulting in a 12% decline in its stock price.
5. What can we expect in upcoming labor data releases?
The Job Openings and Labor Turnover Survey along with the non-farm payrolls report are anticipated to provide critical insights into the job market and Federal Reserve policies.
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