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 Monday after data showed Chinese economic growth slowing more than expected.
Dow Jones Industrial Average futures fell 121 points, or 0.3%. S&P 500 futures shed and Nasdaq-100 futures each dipped about 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.
The country’s National Bureau of Statistics noted an impact from Covid and domestic flooding, saying 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 dipped.
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 yield on the benchmark 10-year Treasury note dipped slightly to 1.277%. Bond yields fall as their prices rise.
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 major stock indexes for much of the last month have ground to new records on the back of robust corporate earnings results. The S&P 500 has closed at a record high 48 times this year out of 155 trading days, or 31% of the time. That figure marks the most frequent closing highs on record back to 1950.
Eighty-seven percent of S&P 500 companies have reported positive earnings per share surprises for the second calendar quarter, according to FactSet as of Friday. 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.
“These are the dog days of August, and low volume and directionless volatility are the order of the moment with 2Q21 earnings season mostly behind us,” Raymond James’ Tavis McCourt said in a note.
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.
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.
— With reporting by Evelyn Cheng.
