Modupe Gbadeyanka
By Investors Hub
The major U.S. index futures are currently pointing to a higher opening on Wednesday, with stocks likely to move back to the upside following the sharp pullback in the previous session.
News that Hong Kong leader Carrie Lam has withdrawn a controversial extradition bill may contribute to initial strength on Wall Street.
The bill, which would have allowed people in Hong Kong to be extradited to mainland China, sparked widespread protests across Hong Kong.
Positive sentiment may also be generated in reaction to a report showing growth in China?s service sector accelerated in August despite broader economic headwinds.
Stocks showed a notable move to the downside during trading on Tuesday as traders returned to their desks following the long holiday weekend. With the pullback on the day, the major averages partly offset the strong gains posted last week.
The major averages climbed off their worst levels of the day but still closed firmly in negative territory. The Dow slumped 285.26 points or 1.1 percent to 26,118.02, the Nasdaq tumbled 88.72 points or 1.1 percent to 7,874.16 and the S&P 500 slid 20.19 points or 0.7 percent to 2,906.27.
Initial selling pressure was generated in reaction to new tariffs taking effect over the Labor Day weekend in the escalating U.S.-China trade.
The U.S. officially imposed a 15 percent tariff on approximately $112 billion worth of Chinese imports, leading to Chinese retaliatory tariffs on billions of dollars worth of U.S. goods.
President Donald Trump repeated his claim in remarks to reporters on Sunday that China is paying for the tariffs by devaluing their currency.
Trump indicated U.S. and Chinese officials still plan to meet for trade talks this month but argued the U.S. “can’t allow China to rip us off anymore as a country.”
In a series of tweets this morning, Trump threatened to get tougher on China if he wins re-election and dismissed suggestions that he work with the European Union to go after Chinese trade practices.
Stocks saw further downside following the release of a report from the Institute for Supply Management showing U.S. manufacturing activity contracted for the first time in three years.
The ISM said its purchasing managers index fell to 49.1 in August after dipping to 51.2 in July, with a reading below 50 indicating a contraction in manufacturing activity. Economists had expected the index to edge down to 51.0.
With the bigger than expected decrease, the PMI dropped below 50 for the first time since August of 2016 and hit its lowest level since January of 2016.
“Comments from the panel reflect a notable decrease in business confidence,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.
He added, “August saw the end of the PMI expansion that spanned 35 months, with steady expansion softening over the last four months.”
A separate report from the Commerce Department showed construction spending inched up by less than expected in the month of July.
Steel stocks showed a significant move to the downside on the day, giving back ground following the substantial rebound seen over the three previous sessions.
The NYSE Arca Steel Index tumbled by 2.6 percent, pulling back toward the nearly three-year closing low set a week ago.
Substantial weakness also emerged among biotechnology stocks, as reflected by the 2.5 percent slump by the NYSE Arca Biotechnology Index. The index ended the session at an eight-month closing low.
Banking, semiconductor, and oil service stocks also saw considerable weakness on the day, while utilities and gold stocks bucked the downtrend.
