By Lisa Pauline Mattkal and Johan M. Cherian
(Reuters) – U.S. stock futures fell on Tuesday as investors grew more concerned about the strength of the world's largest economy, even as they awaited a slew of reports this week to gauge the extent of slowing growth.
Data on Monday showed that US factory activity slowed more than expected in May and construction spending fell in April, weighing on stocks, although the Nasdaq and Nasdaq indexes closed the session slightly higher.
Megacap stocks including Nvidia (NASDAQ:), Apple (NASDAQ:), Alphabet (NASDAQ:), and Microsoft (NASDAQ:) fell between 0.1% and 0.5% in pre-market trading. The gains achieved by these interest rate-sensitive stocks boosted the Nasdaq index in the previous session, with US Treasury bond yields declining.
“Yesterday the ISM manufacturing index signaled a slowdown in growth or a decline in activity, and if we see a slowdown in nonfarm payrolls, that would be a warning sign,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.
Pavlik also cited a move away from corporate giants, along with profit-taking, as additional reasons for the decline.
“A number of stocks have been hit harder than the overall market, but those are the stocks that have performed very well.”
Several major reports scheduled for release this week are expected to provide a clearer picture of the health of the US economy, especially the labor market. The Job Opportunities and Labor Turnover survey is expected later on Tuesday, ahead of the closely watched nonfarm payrolls numbers for May, due on Friday.
Factory orders data is also expected later today, while results of services sector surveys are due on Wednesday.
Broadly strong corporate earnings, coupled with seemingly resilient economic growth, have kept Wall Street upbeat and boosted stocks over several months. However, a series of recent data has heightened concerns, even as markets now expect an early start to interest rate cuts.
Traders now expect about a 65% chance the Fed will cut interest rates in September, up from about 53% before the ISM data and less than 50% last week, according to the Chicago Mercantile Exchange's FedWatch tool.
Monday's trading was also affected by a glitch on the New York Stock Exchange, which led to fluctuations in dozens of stocks.
At 8:31 a.m. EST, it was down 115 points, or 0.30%, down 18.75 points, or 0.35%, and down 55.25 points, or 0.30%.
Among individual companies, Intel (NASDAQ:) rose 1.3% after the company launched next-generation Xeon server processors and priced its Gaudi 3 AI accelerator chips at a lower price than its competitors' products.
Meta (NASDAQ:) and Snap lost 0.7% and 0.8%, respectively, after a report said New York is considering a ban on social media companies that use algorithms to target content to children without parental consent.
Bath & Body Works shares fell 5.7% after lowering its quarterly earnings forecast.
Shares of oil companies fell Exxon Mobil (NYSE:) and Chevron (NYSE:) both fell about 1%, as demand concerns weighed on crude oil prices. Energy stocks were the biggest losers among sectors on Monday. (or)