Dow Futures 135 Pts Lower; Chinese Clampdown Weighs

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Dow Futures 135 Pts Lower; Chinese Clampdown Weighs
Credit: © Reuters.

By Peter Nurse - U.S. stocks are seen opening lower Monday, falling back from record highs ahead of a Federal Reserve meeting and a week of earnings from the major tech companies.

At 7:10 AM ET (1110 GMT), the Dow Futures contract was down 135 points, or 0.4%, S&P 500 Futures traded 12 points, or 0.3%, lower and Nasdaq 100 Futures dropped 25 points, or 0.2%.

All three of the major equity indices closed Friday at record levels but are expected to retreat Monday, weighed by sharp losses in Asia after the Chinese government continued its regulatory clampdown on large swathes of its economy. It released plans to reform the country’s education technology sector over the weekend and also fired a warning shot across the bows of the food delivery sector on Monday. 

This crackdown on the Chinese tech companies continues to put pressure on their American Depositary Receipts, and thus Wall Street as a whole, although there are signs that investors have switched back to U.S. tech plays out of their Chinese counterparts.

This week is scheduled to be one of the busiest for earnings reports, with the high-profile tech sector in the spotlight, particularly after the recent shift away from the reflation trade back into growth stocks.

Tesla (NASDAQ: TSLA ) is due to release numbers after the close Monday, and then Apple (NASDAQ: AAPL ), Alphabet (NASDAQ: GOOGL ) and Microsoft (NASDAQ: MSFT ) on Tuesday, before Facebook (NASDAQ: FB ) and Amazon (NASDAQ: AMZN ) later in the week.

Amazon will also be in focus Monday amid speculation that the online retail giant is exploring venturing into digital currencies after it advertised last week a vacancy for a digital currency product lead.

Aside from earnings, the Federal Reserve holds a two-day policy meeting this week, concluding on Wednesday. The central bank’s policymakers began debating last month when to start cutting back its massive bond-buying program, and investors will be looking for more information on the subject, particularly given the above-trend economic growth and inflation.

The only data release of note on Monday is new home sales at 10 AM ET, which are expected to have rebounded from an 11-month low in June. However, there are a number of important releases throughout the week, with the first look at second quarter U.S. GDP growth on Thursday the highlight. Newswires reported earlier that Goldman Sachs (NYSE: GS ) has slashed its forecasts for growth in the second half, due in part to the revived spread of Covid-19 in the U.S.  New case numbers hit their highest in three months over the weekend.

Elsewhere, oil prices weakened Monday after eking out a small gain over the course of last week, amid reports of China cutting official selling prices for diesel and gasoline.

At 7:10 AM ET, U.S. crude futures traded 0.6% lower at $71.66 a barrel, while the Brent contract fell 0.5% to $73.08.

Additionally, gold futures rose 0.4% to $1,809.55/oz, while EUR/USD traded 0.2% higher at 1.1795.


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