U.S. stock index futures fell sharply on Wednesday, the first trading day of the new year, as disappointing economic data from China hampered global risk appetite.
At around 8:20 a.m. ET on Wednesday, Dow Jones Industrial Average futures pointed to a drop of 401.46 points at the open. Futures on the S&P 500 and Nasdaq 100 also pointed to a weak open.
Shares of tech-related companies were among the worst performers in the premarket. Netflix’s stock dropped 2.9 percent after an analyst at SunTrust Robinson Humphrey said subscriber growth — a key metric for the company — fell short of expectations in the fourth quarter. Chipmakers Nvidia and Advanced Micro Devices both dropped more than 2.5 percent while Micron’s stock pulled back more than 3 percent.
Tesla shares also fell 6.1 percent after releasing weaker-than-expected delivery numbers for the fourth quarter.
The moves in premarket trade come after a private sector survey showed manufacturing activity in the world’s second-largest economy contracted for the first time in 19 months. China’s Markit Manufacturing Purchasing Managers’ Index (PMI) for December dipped to 49.7 from 50.2 in November.
The weaker-than-expected data follows a poor official survey on factory output, compounding concerns about a possible economic slowdown this year.
Futures also fell after The New York Times reported that U.S. Trade Representative Robert Lighthizer has told friends and associates he wants to prevent President Donald Trump from accepting “empty promises” from China on the trade front. The report also says Lighthizer has warned Trump that additional tariffs may be needed to get meaningful concessions from the Chinese. The two countries are currently negotiating a trade deal after exchanging tariffs on billions of dollars worth of their goods.
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Wall Street concluded trading in 2018 on Monday, with all major stock indexes registering their worst yearly performances since the financial crisis.
Despite solid gains on Monday, the S&P 500 and Dow Jones Industrial Average were down 6.2 percent and 5.6 percent, respectively, for 2018. Both indexes posted their biggest annual losses since 2008, when they plunged 38.5 percent and 33.8 percent, respectively. The Nasdaq Composite lost 3.9 percent in 2018, its worst year in a decade, when it dropped 40 percent.
The S&P 500 and Nasdaq also registered their worst quarterly performances since late 2008, while the Dow logged its biggest quarterly loss since 2009. A sizable chunk of this quarter’s losses came during a violent December. The indexes all dropped at least 8.7 percent for the month. The Dow and S&P 500 also recorded their worst December performance since 1931.
“The silver lining to last year’s disappointing equity market is that negative returns do not historically carry over into the succeeding year,” Craig Johnson, chief market technician at PiperJaffray, said in a note to clients. “The S&P 500 has bounced off support near 2,350.”
“While acknowledging there are fundamental concerns, we do not believe the current economic backdrop warrants the degree of bearish sentiment and suspect the proverbial bar for stocks has dropped significantly,” Johnson said. “Technically, we continue to see signs of an intermediate-term bottom emerging and recommend investors tactically deploy capital back into equities.”
On the data front, investors are likely to closely monitor manufacturing PMI data for December at around 9:45 a.m. ET.
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Source: cnbc.com | Original Link