Wall Street set to open lower as fears of sluggish growth increase

U.S. stock futures were in the red 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 how much growth has slowed.

Data on Monday showed U.S. factory activity had slowed more than expected in May and construction spending dropped in April, weighing on stocks, although the S&P 500 and the Nasdaq closed the session slightly higher.

Megacap stocks including Nvidia, Apple, Alphabet and Microsoft fell between 0.1% and 0.5% in premarket trading. Gains in these rate-sensitive stocks boosted the Nasdaq in the previous session, as U.S. Treasury yields slipped.

“The ISM manufacturing yesterday (indicated) a slowdown in growth or decrease in activity, and if we see a slowdown in nonfarm payrolls, that’s going to be more of a warning sign,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

Pavlik also cited rotation away from megacaps, along with profit-taking, as additional reasons for the decline.

“A number of stocks have gotten hit harder than the overall market, but those are the ones that have performed extremely well.”

Several key reports scheduled for release this week are expected to provide a clearer picture of U.S. economic health, particularly the labor market. The Job Openings and Labor Turnover Survey is expected later on Tuesday, ahead of the closely watched nonfarm payrolls figures for May, due on Friday.

Factory orders data is also expected later in the day, while the results of surveys on the services sector are due on Wednesday.

Broadly strong corporate earnings, coupled with seemingly resilient economic growth, kept Wall Street optimistic and buoyed stocks over several months. However, a string of recent data has led to worries creeping in, even as markets now expect an earlier start to rate cuts.

Traders are now pricing in a nearly 65% chance of the Fed cutting rates in September, up from about 53% before the ISM data was out and under 50% last week, according to the CME’s FedWatch tool.

Monday’s trading was also impacted by a glitch at the New York Stock Exchange, triggering volatility in dozens of stocks.

At 8:31a.m. ET, Dow e-minis were down 115 points, or 0.30%, S&P 500 e-minis were down 18.75 points, or 0.35%, and Nasdaq 100 e-minis were down 55.25 points, or 0.30%.

Among individual movers, Intel gained 1.3% after the company launched its next-generation Xeon server processors and priced its Gaudi 3 AI accelerator chips below its rivals’ products.

Meta and Snap lost 0.7% and 0.8%, respectively, after a report said New York was considering a ban on social media companies using algorithms to steer content to children without parental consent.

Bath and Body Works dropped 5.7% after a lower revision to its quarterly profit forecast.

Oil companies fell, with shares of Exxon Mobil and Chevron both down about 1%, as demand worries weighed on crude prices. Energy stocks were the biggest sectoral decliners on Monday. – Reuters