U.S. stock futures drift lower, Fed minutes loom — what’s moving markets
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Investing.com — U.S. stock futures edge lower as traders return to their desks following the Fourth of July holiday. Attention will largely be on the release of minutes from the Federal Reserve’s last policy meeting, while investors will also be digesting disappointing services sector data out of China.
1. U.S. stock futures point lower after Independence Day holiday
U.S. stock futures inched down on Wednesday as Wall Street prepared to reopen after the Fourth of July holiday and investors awaited the release of the minutes from the Federal Reserve’s June meeting (see below).
At 05:20 ET (09:20 GMT), the Dow futures contract dropped by 99 points or 0.29%, S&P 500 futures shed 13 points or 0.31%, and Nasdaq 100 futures lost 70 points or 0.46%.
Markets in the U.S. were shuttered on Tuesday and closed early on the prior day.
In shortened trading on Monday, the main indices posted muted gains to kick off the second half of 2023, with the benchmark S&P 500 increasing by 0.12% and the broad-based Dow Jones Industrial Average rising by 0.03%. The tech-heavy Nasdaq Composite, which has performed strongly throughout the year thanks in part to a surge in interest in artificial intelligence, ticked higher by 0.21%.
2. Fed minutes on the horizon
The Federal Reserve is set to publish the minutes from its June policy meeting Wednesday, with observers keen to learn more about why officials at the U.S. central bank decided to keep interest rates on hold last month.
At their last gathering, the Federal Open Market Committee voted to keep borrowing costs steady at the existing target range of 5% to 5.25%. But policymakers signaled the possibility of two further rate hikes in 2023, including one at the Fed’s next meeting later this month.
According to Investing.com’s Fed Rate Monitor Tool, the Fed is widely tipped to implement a quarter-point increase in July, which would bring the benchmark federal funds rate up to 5.25% to 5.5%.
The minutes from last month’s meeting, as well as the upcoming release of the June jobs report on Friday, could factor into these expectations.
Elsewhere, John Williams, president of the Federal Reserve Bank of New York, is scheduled to deliver remarks on Wednesday.
3. Brent slips as broader economic concerns weigh
Oil benchmark Brent retreated on Wednesday as renewed worries over a global economic slowdown dented market sentiment and overshadowed the news earlier this week of further supply cuts from two major exporters.
By 05:20 ET, the Brent contract dipped by 0.54% to $75.84 a barrel, while U.S. crude futures traded 1.69% higher at $70.97 per barrel, having traded through the Fourth of July holiday without a settlement.
Brent had climbed on Tuesday, lifted by announcements from Saudi Arabia and Russia that they planned to roll out more output reductions.
However, concerns remain over how a renewal of Fed policy tightening could impact overall economic activity and, by extension, fuel demand.
Much of the focus will subsequently center on the release of the Fed minutes later today, although traders will also be keeping an eye on U.S. crude and product inventory data from the American Petroleum Institute.
4. China services activity slows
China’s services sector expanded at a slower-than-expected pace in June, according to a private survey on Wednesday, raising more alarm bells over the post-pandemic recovery of the world’s second-biggest economy.
The Caixin services purchasing managers’ index came in at 53.9 during the month, weaker than expectations of 56.2 and below May’s level of 57.1. It was the index’s second-worst reading this year.
Despite the Dragon Boat festival holiday earlier in June, a revival in tourism has appeared to only give a limited boost to services demand. Government liquidity injections and interest rate cuts by the People’s Bank of China have also provided only subdued support to local business activity.
When coupled with a recent series of weak economic data, the Caixin print adds to concerns over whether China will rebound from the COVID-19 era as strongly as markets are expecting.
5. U.S. factory orders due
The May reading for new orders for U.S.-made goods will also be released later on Wednesday, with recent data showing that the country’s manufacturing sector is being dragged down by a recent string of aggressive Fed interest rate hikes.
U.S. factory orders are expected to increase by 0.8% during the month, up from the April mark of 0.4%.
The manufacturing industry, which accounts for more than 11% of the economy, was boosted largely by defense spending in April.
However, the Fed policy tightening, along with stricter lending conditions following the collapse of three U.S. banks earlier this year, have hit these businesses. Spending is also showing signs that it is shifting away from goods and into services.
