Investing.com – Wall Street futures pointed to a lower open on Tuesday as investors kept watch over the European banking sector and Japan’s stimulus plans while looking ahead to data points that could give indications for the Federal Reserve’s (Fed) plans to return to policy normalization as well as some key earnings reports from U.S. firms.
The blue-chip Dow futures lost 17 points, or 0.09%, by 10:53AM GMT, or 6:53AM ET, the S&P 500 futures fell 3 points, or 0.14%, while the tech-heavy Nasdaq 100 futures traded down 5 points, or 0.11%.
The European banks took another leg down on Tuesday as the stress tests announced late Friday continued to put downward pressure on lenders in the region.
Italy’s Banca Monte dei Paschi di Siena SpA (MI:BMPS), the world’s oldest bank, continued to suffer from concerns over its non-performing loan (NPL) portfolio, while rival Unicredit (MI:CRDI) suffering contagion from similar worries.
Germany’s Commerzbank (DE:CBKG) added to worries after launching a profit-warning that it blamed primarily on negative rates implemented by the European Central Bank (ECB), while news that Swiss lender Credit Suisse Group AG (SIX:CSGN) and German banking giant Deutsche Bank AG (DE:DBKGn) will be dropped from an index of Europe's top 50 blue-chip companies next week levied a further blow to the embattled sector.
In another obstacle to bullish sentiment in stocks, investors were disappointed by details of Japanese Prime Minister Shinzo Abe’s fresh stimulus package.
The package includes 13.5 trillion yen ($132 billion) in fiscal measures, while actual new, direct spending will total about 7.5 trillion yen, most of it over the next two years.
While the headline figure for the package totals 28.1 trillion yen, it includes public-private partnerships and other amounts that are not direct government outlays and thus may not give an immediate boost to growth, according to market analysts.
Stateside, traders looked ahead to key U.S. data later Tuesday to gauge the health of the world's largest economy and whether it is strong enough to warrant a rate hike later this year.
The Commerce Department will release its core personal consumption expenditure (PCE) index for June at 12:30GMT, or 8:30AM ET. The Fed’s favorite gauge of inflation is expected to remain at 1.6% year-on-year, still below the central bank’s 2% target.
At the same time, markets will see the latest measure of consumer health with the release of personal income and spending, also for June.
A string of weak data in the prior week caused market participants to take the possibility of a rate hike this year off the table.
Fed funds futures are currently pricing in just an 18% chance of a rate hike by September. December odds were at 42.7%, compared to 53% at the start of last week.
On the company front, traders will focus on earnings from Dow components Pfizer (NYSE:PFE) and Procter & Gamble (NYSE:PG) among several other firms set to report on Tuesday.
Meanwhile, oil prices moved higher on Tuesday, but remained in bear market territory amid signs of increasing production in the U.S. and rising output among members of the Organization of the Petroleum Exporting Countries (OPEC).
Crude futures are more than 20% below their 2016 highs above $50 a barrel scaled in early June, technically placing it in bear market territory, as signs of an ongoing recovery in U.S. drilling activity combined with elevated stocks of fuel products weighed.
U.S. crude futures gained 1.22% to $40.55 by 10:55AM GMT, or 6:55AM ET, while Brent oil traded up 1.47% to $42.76.