U.S. Futures Edge Lower Amid Fresh Europe, China Worries
U.S. stock market futures lowered about 1 percent lower early Monday amid renewed fears of recession and Greek's insolvency as well as a growth slowdown in China.
Flight to safety trades are on, and risky assets are being sold off globally. The 10-year U.S. Treasury reaching an all-time low of 1.41 percent in London trading.
The S&P 500 could soon fall out of its uptrend marked by the June and July lows. Volume support in the 1320 to 1325 could come into play in this week's trading. Below that, traders also will have an eye on key a near-term technical retracement level at 1310.
European markets are being hit hard in the early going. The International Monetary Fund will stop paying further rescue aid to Greece, according to Der Spiegel magazine in Germany on Sunday, citing European Union officials with knowledge of the matter.
That has only increased fears that the debt-strapped nation will not be able to meet debt-reduction targets, and that it will request more aid that from other countries that is likely to go unfulfilled. A funding shortfall could lead to insolvency as soon as September.
The euro fell for a fourth day versus the dollar, as other nations in Europe also fell hard on recession fears. Italian stocks hit all-time lows in the intraday session early Monday, with bank stocks among the hardest hit. Large banks including UniCredit and Intesa Sanpaolo were suspended from trading after hitting 10 percent loss limits. 10-year Italian government bonds rose another 25 bps to 7.45.
Fresh concerns about a Chinese economic slowdown also are weighing on the markets. The Shanghai Index is now trading at its lowest levels since March 2009. An official said economic growth will likely slow this quarter. Japan cut its economic outlook for China, it's largest Asian trading partner.
In the U.S. banking stocks will be in the spotlight. The weekly open and close of the Financial Select Sector SPDR (NYSE: XLF) last week eclipsed the prior week's open and closing range, a negative near-term trading signal. Morgan Stanley shares are among those threatening to trade at their lowest levels since last October.
Materials issues also will be in focus amid the new concerns in China, possibly giving back gains made in four of the past six trading sessions. Up-trending support at the lows from May through July on the Materials Select Sector SPDR (NYSE: XLB) will be closely watched.
Tech stocks are expected to be affected less by the day's news from China and Europe. Tech will also be in focus, ahead of Texas Instruments (NYSE: TXN) expected report on Monday, Apple's (NASDAQ: AAPL) earnings on Tuesday, and Facebook's (NYSE: FB) first report as a public company on Thursday.
McDonald's (NYSE: MCD)'s reports Monday morning, and investors will be closely monitoring the company's results in Europe. Analysts are expecting EPS of $1.37 on average, up slightly from the $1.35 a share it reported in the year-ago quarter.
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