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U.S. stock-index futures were trading lower early Tuesday, as investors reassessed the economic and public-health environment following a strong rally to start the week in the previous session.
The pause in enthusiasm for equities followed revised forecasts from the European Commission and the Paris-based OECD which expect the highest unemployment rates since the Great Depression of the 1930s amid the COVID-19 pandemic.
How are benchmarks performing?
Futures for the Dow Jones Industrial Average YM00, -0.75% YMU20, -0.75% were down 240 points, or 0.9%, at 25,940; those for the S&P 500 index ES00, -0.62% ESU20, -0.62% gave up 27.65 points, or 0.9%, at 3,144.25; while Nasdaq-100 futures NQ00, -0.30% NQU20, -0.30% were 49.50 points lower at 10,549, a decline of 0.5%.
On Monday, the Dow Jones Industrial Average DJIA, +1.78% gained 459.67 points, or 1.8%, to end at 26,287.03. The S&P 500 SPX, +1.58% climbed 49.71 points, or 1.6%, ending at 3,179.72 and matching its longest win streak, five straight sessions since the period ended Dec. 17; while the Nasdaq Composite Index COMP, +2.21% surged 226.02 points, or 2.2%, to 10,433.65, scoring its third straight record and its 24th of the 2020.
What’s driving the market?
Nagging unease over the outlook for the global economy in midst of rising coronavirus infections helped to dampen the buying mood on Wall Street, with technology and airlines stocks leading the pullback, after a powerful updraft to kick off the month.
On Tuesday, the Organization for Economic and Cooperation and Development said that unemployment will reach the highest level since the Great Depression and may not return to pre-crisis levels until 2022.
That report comes as the European Commission lowered its eurozone economic forecast by a percentage point, predicting a contraction of 8.7% this year. That news also comes as German industrial production rebounded a slower-than-forecast 7.5% in May, according to data released Tuesday.
Adding to the sober economic updates were comments from Atlanta Fed President Raphael Bostic who described the nascent U.S. recovery from the viral outbreak as “leveling off,” raising doubts about a V-shaped, or swift and powerful, economic rebound. Bostic speaks again at 9 a.m. Eastern Time and Randal Quarles, vice chairman of supervision at the Federal Reserve is set to speak at 1 p.m., while San Francisco Fed President Mary Daly and Richmond Fed President Thomas Barkin both appear at 2 p.m.
Market participants also attributed some of the day’s malaise to dimming outlook for quarterly earnings, even though they are widely expected to be poor, given the challenges posed by the pandemic.
“We are heading into second quarter earnings season though which will naturally be a disaster, albeit one that will more than likely get a free pass, as investors focus more on the reopening prospects,” wrote Craig Erlam, senior market analyst at Oanda, in a daily research note.
“Second wave anxiety is putting a downer on the economic enthusiasm that accompanied the lifting of restrictions around the world and its left investors caught in two minds about the great stock market recovery,” he wrote.
Looking ahead, investors are awaiting a report from the Labor Department on May job openings on Tuesday at 10 a.m. Economists polled by Dow Jones expect vacancies to drop to 4.5 million in May from 5.05 million in April, which was the lowest total since December 2014.
