US futures were around the flatline on Monday, as investors weigh China's risks and a potential government shutdown while awaiting speeches from several Fed officials and Fed Chair testimony on the coronavirus CARES Act before the Senate. The Evergrande debt crisis and power curbs in China are raising concerns about the slowdown in the pace of economic recovery. Meanwhile, the Fed will likely start reducing stimulus this year, and speeches from several Fed policymakers this week could provide more clues on the exact tapering timeline. Fresh economic data due this week including the ISM Manufacturing PMI and PCE inflation should also provide an update on the American economy.
Oil majors Exxon Mobil and Chevron Corp rose 1.5% and 1.2% in premarket trade, respectively, tracking crude prices, while big lenders including JPMorgan, Citigroup, Morgan Stanley and Bank of America Corp gained about 0.8%. Industrials 3M Co and Caterpillar Inc, which tend to benefit the most from an economic rebound, also inched higher. Market participants moved into value and cyclical stocks from tech-heavy growth names after the Federal Reserve last week indicated it could begin unwinding its bond-buying program by as soon as November, and may raise interest rates in 2022.
Though monetary tightening is frequently seen as a drag on stocks, some investors view the Fed’s stance as a vote of confidence in the U.S. economy. The S&P 500 Value index is down 1.4% so far this month, but still outperforming its growth counterpart. Wall Street ended a turbulent week with slight increases on Friday, although the benchmark S&P 500 index was on track to break its seven-month winning streak on concerns related to higher potential corporate taxes. investors will now watch for a raft of economic indicators, including durable goods orders and the ISM manufacturing index this week to gauge the pace of the recovery, as well as bipartisan talks over raising the $28.4 trillion debt ceiling.
The U.S. Congress faces a Sept. 30 deadline to prevent the second partial government shutdown in three years, while a vote on the $1 trillion bipartisan infrastructure bill is scheduled for Thursday. At 6:38 a.m. ET, Dow e-minis were up 88 points, or 0.25%, S&P 500 e-minis were up 1.5 points, or 0.03%, and Nasdaq 100 e-minis were down 47 points, or 0.31%.Mega-cap growth names Alphabet Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc and Apple Inc fell between 0.3% and 0.4%.
The yield on the benchmark 10-year Treasury note continued to rise to 1.47% in the last week of September, the highest since June 29th, as investors continue to digest prospects the Fed would start tightening monetary policy soon, despite slower growth and rising inflation. Treasury yields are likely to remain in focus in the next few weeks as the reflation trade is set to gain traction. Attention this week turns to the Fed Chair testimony on coronavirus support before the US Senate and Powell's participation in an ECB Forum panel.
Meanwhile, WTI crude jumped more than 1% to around $75 a barrel on Monday, trading at its highest since mid-July and following the fifth straight gains last week, boosted by growing fuel demand and falling US crude inventories. Disruptions in US Gulf Coast production following Hurricane Ida and other storms have led to sharp draws in the US and global inventories. EIA data showed US crude stocks fell 3.5 million barrels to 414 million last week, the lowest since October 2018. In Asia, meantime, India's crude imports rose to their highest in three months in August, rebounding from July's near one-year low. Capping some gains was China’s first public sale of state oil reserves.