Dow futures fall more than 100 points to start the week as China's economic growth slows

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

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

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 146 points, or 0.4%. S&P 500 futures shed and Nasdaq-100 futures each dipped about 0.4%. 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.

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.

“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.

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S&P 500 and Dow clinch new records as stocks end day higher

U.S. stocks edged higher on Thursday, pushing both the Dow Jones Industrial Average and S&P 500 to fresh records during an otherwise tame session.

The Dow rose 14.88 points to 35,499.85, a record close for the blue-chip index. The S&P 500 climbed 0.3% to 4,460.83, also a record. The Nasdaq Composite outperformed with a gain of 0.3% to end the day at 14,816.26.

Among the S&P sectors, health care and tech outperformed with gains of about 0.8% and 0.6%, respectively, while energy, industrials and materials stocks lagged. Salesforce and Apple were the best-performing stocks in the Dow, while Home Depot and Visa slipped.

“Despite the relatively placid surface, there are some more gyrations under the surface of the S&P 500 today,” wrote Goldman Sachs analyst Chris Hussey.

“Industrials, Materials, and Energy all led the S&P 500 through the last few sessions, supported in parted by the hopes for increased infrastructure spending, but are now the worst performers today,” he added. “Conversely, we’re seeing a rotation back into long duration stocks, including Tech, Healthcare, and Comm Services.”

The Labor Department reported Thursday morning that initial jobless claims declined slightly last week as the U.S. labor market continues its recovery from last year’s recession. There were 375,000 claims last week, matching estimates. The prior reading came in at 385,000 claims, but was revised to 387,000.

The prices U.S. manufacturers and other businesses pay for labor, raw materials and other goods rose again in July. The government said its producer price index, excluding volatile food, trade services and energy components, rose 0.9% last month versus a forecast for a 0.5% gain.

The update to producer price inflation came a day after the Labor Department said consumer prices surged 5.4% from a year earlier, for the month of July, and 0.5% from the previous month. Core inflation, however, rose by just 0.3% in July, below the 0.4% increase forecast.