© Reuters
Investing.com – US stock futures fall as traders return to their desks after the July 4 holiday. Attention will focus primarily on the release of minutes from the Federal Reserve’s latest monetary policy meeting, while investors will also digest disappointing service sector data from China.
1. US stock futures point to a drop after Independence Day
US stock futures were slightly lower on Wednesday as Wall Street prepared for the July 4 reopening after the bank holiday and investors awaited the release of minutes from the June Federal Reserve meeting (see below).
As of 05:20 ET (09:20 GMT), the contract was down 99 points or 0.29%, losing 13 points or 0.31% and losing 70 points or 0.46%.
Markets in the US were closed Tuesday and closed earlier the previous day.
In shortened trading on Monday, the major indices posted muted gains to kick off the second half of 2023, with the benchmark gaining 0.12% and the broad base gaining 0.03%. The tech-heavy sector, which performed strongly throughout the year thanks in part to increased interest in artificial intelligence, rose 0.21%.
2. Fed minutes on the horizon
The Federal Reserve is expected to release the results of its June monetary policy meeting on Wednesday. Observers are keen to learn more about why Federal Reserve officials decided last month to leave interest rates unchanged.
At its most recent meeting, the Federal Open Market Committee voted to keep borrowing costs stable within the existing 5% to 5.25% target range. However, policymakers signaled the possibility of two more rate hikes in 2023, including one at the Fed’s next meeting later this month.
According to data from Investing.com, the Fed is widely expected to introduce a quarter-point hike in July, taking the federal funds rate to 5.25% to 5.5%.
Minutes from last month’s meeting as well as the forthcoming release of the June jobs report on Friday could support those expectations.
Elsewhere, John Williams, President of the Federal Reserve Bank of New York, is scheduled to give a speech on Wednesday.
3. Brent slips as broader economic concerns weigh
The oil benchmark fell on Wednesday as renewed concerns about a global economic slowdown weighed on market sentiment and overshadowed news earlier this week of further supply cuts by two major exporters.
As of 05:20 ET, the Brent contract was down 0.54% at $75.84 a barrel, while futures were trading 1.69% higher at $70.97 a barrel after trading through the May 4 holiday July traded without settlement.
Brent was higher on Tuesday, buoyed by announcements from Saudi Arabia and Russia that they are planning further production cuts.
However, concerns remain about how a renewed tightening of Fed policy could affect overall economic activity and, by extension, fuel demand.
Much of the focus will then be on the Fed minutes release later today, although traders will also be keeping an eye on US crude and product inventory data from the American Petroleum Institute.
4. Service activity in China is slowing
China grew at a slower-than-expected rate in June, according to a private survey Wednesday, raising further alarm bells about the world’s second-biggest economy recovering from the pandemic.
The reading for the month was 53.9, weaker than expected 56.2 and below May’s 57.1. It was the index’s second worst reading this year.
Despite the Dragon Boat Festival holiday in early June, a revival in tourism seemed to have had only a limited boost in demand for services. Government liquidity injections and interest rate cuts by the People’s Bank of China have also provided only muted support for local business activity.
Coupled with a recent batch of weak economic data, the Caixin data is adding to concerns over whether China will recover from the COVID-19 era as strongly as markets are expecting.
5. US factory orders due
The May number for new orders for US-made goods will also be released later on Wednesday. Recent data shows that the country’s manufacturing sector is being hit by a series of aggressive Fed rate hikes.
The US is expected to rise 0.8% over the month from 0.4% in April.
Manufacturing, which accounts for more than 11% of the economy, was boosted in April primarily by defense spending.
However, the tightening of Fed policy and tighter lending standards following the collapse of three US banks earlier this year have hit these companies. Spending is also showing signs of shifting away from goods and towards services.
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