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Wall Street set for weak open as caution prevails ahead of trade talks

Kitco News

(Reuters) - Wall Street’s main indexes were set to slip at the opening bell on Monday as investors braced for U.S.-China trade talks later in the week, after a rollercoaster start to the month on fears that the world’s largest economy could be sliding into a recession.

Tariff concessions from the United States and China last month fanned hopes of a dissolution to a prolonged trade war, but market participants have grown nervous about the outcome of high-level negotiations that begin on Thursday.

Chinese officials signaled they were increasingly reluctant to agree to a broad trade deal pursued by U.S. President Donald Trump, Bloomberg reported over the weekend.

“Right now, investors are more focused on an actual outcome from these talks, but a majority have become somewhat skeptical that there will be something concrete this week,” said Rick Meckler, partner at Cherry Lane Investments, New Vernon, New Jersey.

Wall Street logged a choppy start to the month as concerns fueled by a contraction in U.S. factory activity and weaker-than-expected services sector data were countered by rising bets of a third interest rate cut this year by the Federal Reserve.

Traders see a 77.5% chance of the Fed cutting rates by a quarter percentage point at its policy meeting later this month, up from about 40% a week ago, according to CME Group’s FedWatch tool.

After losing about 3% earlier in the week, the S&P 500 .SPX and Dow Jones .DJI indexes gained more than 1% on Friday after a report showed nonfarm payrolls increasing by 136,000 last month and the unemployment rate dropping to a 50-year low.

Investors will now turn to the third-quarter earnings season, which kicks off next week with U.S. banks reporting results, probing the impact of the trade war on Corporate America.

Analysts expect the lowest quarterly profit performance since 2016, with S&P 500 earnings falling 2.7% from a year ago, based on IBES data from Refinitiv.

At 8:57 a.m. ET, Dow e-minis 1YMcv1 were down 53 points, or 0.2%. S&P 500 e-minis EScv1 were down 7.75 points, or 0.26% and Nasdaq 100 e-minis NQcv1 were down 25.25 points, or 0.33%.

Among stocks, E*Trade Financial Corp (ETFC.O) rose 2.4% after UBS raised its rating on the online broker’s shares to “buy”.

Ride-hailing company Uber Technologies Inc (UBER.N) also rose 3.2% as Citigroup upgraded its shares to “buy”.

General Motors Co (GM.N) dropped 1.3%, after the UAW rejected the carmaker’s latest offer of a four-year labor contract and as its striking workers took a “turn for the worse” on Sunday.

Align Technology (ALGN.O) shares fell 1.8%, after Guggenheim downgraded shares of the orthodontic device maker to “neutral” on rising competition.

Rival SmileDirectClub Inc SDC.O added 2.6%. At least five brokerages started coverage of the teeth alignment company with “buy” or equivalent ratings, despite a disappointing market debut last month.

Reporting by Shreyashi Sanyal in Bengaluru; Editing by Bernard Orr

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