Dow Futures Down 80 Pts; ISM Manufacturing PMI Data Due

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Dow Futures Down 80 Pts; ISM Manufacturing PMI Data Due

By Peter Nurse    

Investing.com -- U.S. stocks are seen opening lower Friday, adding further losses to the weakest first half for over 50 years as investors fret over red-hot inflation and tightening monetary policy.

At 07:00 AM ET (1100 GMT), the Dow Futures contract was down 80 points, or 0.3%, S&P 500 Futures traded 12 points, or 0.3% lower, and Nasdaq 100 Futures dropped 60 points, or 0.5%.

The main indices on Wall Street closed sharply lower Thursday, with the broad-based S&P 500 ending the first six months of the year over 20% lower, its largest first-half decline since 1970, after dropping more than 16% in the second quarter.

The blue-chip Dow Jones Industrial Average ended the quarter with losses of just over 11%, down 15% on the half, while the tech-heavy Nasdaq Composite dropped over 22% on the quarter, its worst since 2008, resulting in losses of just under 30% year-to-date.

The Federal Reserve hiked interest rates by 75 basis points at its meeting in June, its biggest increase since 1994, and Fed Chair Jerome Powell reiterated earlier this week the central bank’s commitment to keep tightening monetary policy to bring down inflation .

The risk of another sell-off in equity markets is still high, according to Goldman Sachs, as investors are only pricing a mild recession.

“Much of the valuation de-rating this year has been due to higher rates/inflation,” Goldman analysts said, in a note. “Unless bond yields start to decline and buffer rising equity risk premiums due to recession fears, equity valuations could decline further.”

Soaring inflation isn’t only a problem in the U.S., with Eurozone consumer prices rising to a fresh record high in June, climbing to 8.6%, up from 8.1% in May, driven in particular by a spike in prices of energy and food.

The main U.S. data release Friday is the ISM manufacturing PMI for June, which is expected to show a fall in sentiment, with the index expected to drop to 54.9 from 56.1 the previous month. 

In the corporate sector, Micron (NASDAQ: MU ) will be in the spotlight after the chipmaker offered weak guidance for the full-year, suggesting excess inventories and slower spending on consumer electronics will hurt demand.

Kohl's (NYSE: KSS ) will also be in focus following media reports that the department store chain has called off talks to sell itself to Vitamin Shoppe owner Franchise Group (NASDAQ: FRG ). 

Oil prices bounced Friday on doubts about the likelihood of Iranian oil returning to the global market any time soon, after reports citing U.S. officials suggested talks in Doha aimed at reviving the 2015 UN deal on non-proliferation appear to have gone badly.

Still, the crude market is heading for its third consecutive weekly fall, its worst run this year, on concerns about the strength of the U.S. economy, the largest consumer of crude in the world, and with the Organization of Petroleum Exporting Countries and allies increasing output by 648,000 barrels per day in July and August.

By 07:00 AM ET, U.S. crude futures traded 2.4% higher at $108.23 a barrel, while the Brent contract rose 2.5% to $111.77. Both contracts fell around 3% during the previous session, and are on course to fall at least 2% this week.

Additionally, gold futures fell 1% to $1,789.90/oz, while EUR/USD traded 0.3% lower at 1.0452.

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