Dow futures slip as China-U.S. tensions ratchet up, while investors watch for earnings from Tesla, Microsoft

Dow futures slip as China-U.S. tensions ratchet up, while investors watch for earnings from Tesla, Microsoft

U.S. stocks were indicated modestly lower early Wednesday as investors watched signs of Sino-American testiness and readied for corporate results from major corporations, including Tesla and Microsoft.

Market participants also watched the status of Congressional negotiations on another financial aid package for businesses and individuals coping with the economic damage wrought by the coronavirus pandemic.

Futures for the Dow Jones Industrial Average YM00, -0.18% YMU20, -0.18% slipped 72 points, or 0.3%, at 26,653; those for the S&P 500 index ES00, -0.13% , ESU20, -0.13% gave up 7.05 points to reach 3,244.25, a decline of 0.2%; while Nasdaq-100 futures NQ00, +0.11% NQU20, +0.11% were 18 points higher, or 0.2%, at 10,869.



On Tuesday, the Dow DJIA, +0.59% added 159.53 points, or 0.6%, to end at 26,840.40, the S&P 500 index SPX, +0.16% rose 5.46 points, or 0.2%, at 3,257.30, marking its highest close since Feb. 21 and putting the benchmark 3.8% from its Feb. 19 closing high. Meanwhile, the Nasdaq Composite Index COMP, -0.80% closed 86.73 points, or 0.8%, lower at 10,680.36,

What’s driving the market?

Renewed fretting about relations between Beijing and Washington are in focus after the Wall Street Journal and other media reported that the U.S. instructed China to close its consulate in Houston. The development represented a “political provocation unilaterally launched by the U.S.,” China’s Foreign Ministry said during a regular news briefing in Beijing. “China urges the U.S. to immediately rescind its erroneous decision, otherwise China will undertake legitimate and necessary responses,” the official said.

The simmering tensions between the global superpowers raise risks for the valuations of many of large capitalization stocks during a worsening of the coronavirus pandemic in the U.S. in particular.

“Tensions between the US and China have been brewing recently in relation to Hong Kong, and this could be the next chapter of the frosty relations between the two countries,” wrote David Madden, market analyst at CMC Markets UK, in a daily research note.

China is considering retaliating against the Chinese operations of two European telecommunication-equipment manufacturers if the European Union follows the U.S. in barring Huawei Technologies from 5G networks, The Wall Street Journal reported this week.

Meanwhile, concerns that an additional Congressional economic package won’t be achieved before a $600-a-week top-up in jobless benefits runs out for millions of Americans at the end of the month, was also causing some anxieties among bullish investors. On Tuesday, Senate Majority Leader Mitch McConnell said Congress is unlikely to pass a new fiscal stimulus bill before lawmakers head to recess in two weeks.

Investors have been focusing their attention on second-quarter results from American corporations though, with Tesla and Microsoft among the prominent names that will be parsed by traders on Wednesday.

Thus far, quarterly results have been better-than-feared. Of the 58 companies that have reported results thus far, 77.6% have reported above analyst expectations, compared with the average of 65% who reported above consensus estimates in prior quarters, according to data from Refinitiv, based on data going back to 1994. A little over 22% have reported results that fall below expectations, versus an average of 21% missing, the data show.

In pandemic news, the number of confirmed cases of COVID-19 cases in the U.S. rose above 3.8 million on Tuesday, data show, as President Donald Trump changed his view of face masks in the face of falling poll numbers ahead of the November elections.

Holding his first White House task force briefings in months on the status of the epidemic on Tuesday, he said that the coronavirus outbreak could “get worse before it gets better.” There are now 14.8 million confirmed cases of COVID-19 worldwide and at least 611,599 people have died, the Johns Hopkins data shows.

On the U.S. economic front, market participants await an update on existing home sales for June due at 10 a.m. Eastern Time.

Which stocks were in focus?
  • InternationalBusiness Machines Corp. IBM, -0.24% reported second-quarter net income of $1.36 billion, or $1.52 a share, compared with $2.5 billion, or $2.81 a share, in the year-ago period.
  • Snapchat parent Snap Inc. SNAP, -2.09% saw its shares decline in premarket trade after the social-media company missed expectations on daily active users.
  • United Airlines Holdings Inc. UAL, +2.28% said late Tuesday that it lost $1.6 billion, or $5.79 a share, in the second quarter, contrasting with a profit of $1.05 billion, or $4.02 a share, in the year-ago quarter.
  • Biogen Inc. BIIB, -1.13% said late Tuesday that Michael McDonnell will become chief financial officer on Aug. 15, a day before reporting its quarterly results.
  • Microsoft Inc. MSFT, -1.34% and Tesla TSLA, -4.54% results are due after Wednesday’s close.

Read: Tesla’s earnings on tap this week: Will a loss end its blowout stock rally?

How are other markets trading?

In Europe, the Stoxx 600 Europe index SXXP, -0.88% headed 0.9% lower, while the U.K.’s FTSE UKX, -0.69% retreated by up 0.9%.

Germany’s DAX 188658, -0.24% traded 0.3% lower, after a 1% gain on Tuesday as the European Union forged its landmark recovery package.

Gold futures GCQ20, +0.69% extended its climb, rising $16, or 0.9%, to $1,859.90 an ounce in Wednesday early trade on the New York Mercantile Exchange, adding to its most to the highest level for the most-active contract since Sept. 2011. August futures for the U.S. crude benchmark US:CLQ20 lost 1.3% to $41.36 a barrel after surging 2.8% on Tuesday.

The 10-year Treasury note yield TMUBMUSD10Y, 0.591% edged 1.1 basis point lower to around 0.59%. Bond prices move in the opposite direction of yields.

In currency markets, the dollar was softening by 0.1%, against its six major rivals based on trading of the ICE U.S. dollar index. DXY, -0.15%

In Asia, the Nikkei NIK, -0.57% closed 0.6% lower, while China’s CSI 300 gauge 000300, +0.49% added 0.5%. South Korea’s Kospi 180721, -0.00% finished in negative territory but virtually unchanged; and Hong Kong’s Hang Seng index HSI, -2.25% tumbled 2.3%, wiping out its Tuesday gain.


Originally published on MarketWatch

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