China stimulus hopes send U.S. stock futures sharply higher
New York (Sept 8) Investors are returning from the Labor Day weekend in an upbeat mood on Tuesday, pushing U.S. stock futures firmly higher on fresh expectations the Chinese central bank will inject more stimulus after a round of weak trade data.
Futures for the Dow Jones Industrial Average YMU5, +1.54% jumped 303 points, or 1.9%, to 16,422, while those for the S&P 500 index ESU5, +1.63% climbed 37.55 points, or 2%, to 1,959.72. Futures for the Nasdaq 100 index NQU5, +1.63% added 78.50 points, or 1.9%, to 4,272.50.
U.S. stock markets were closed on Monday for Labor day, when European markets rose, but Asia ended mostly lower.
Overnight on Tuesday, data showed Chinese exports fell in August for a second straight month, underscoring concerns that the world’s second-largest economy is losing momentum. Exports fell 5.5% after a drop of 8.3% in July. Imports slid 13.8% in August.
“The latest data reflect soft domestic demand at the time when external demand is also relatively weak, which puts pressure on the government to step in and increase spending and on the [People’s Bank of China] to potentially inject another dose of monetary policy stimulus and/or allow the yuan to weaken,” analyst at Rabobank said in a note.
China-easing expectations helped prop up markets in Asia on Tuesday, where the Shanghai Composite Index SHCOMP, +2.92% closed 2.9% higher. Chinese ETFs were also rallying premarket, with the Direxion Daily FTSE China Bull 3X Shares YINN, +19.33% up 16% and Direxion Daily CSI 300 China A Share Bull 2X Shares CHAU, -7.98% 9.6% higher.
Also on Tuesday, Chinese stock market regulators revealed plans to introduce a “circuit breaker” mechanism for its stock exchanges, aimed at preventing panic selloffs during heightened volatility.
Countdown to FOMC: With only little over a week left to the Federal Open Market Committee meeting on Sept. 16-17, investors are increasingly zeroing in on any clues as to whether the central bank is ready to raise interest rates.
The closely watched nonfarm payrolls report released Friday left the market divided on the rate-hike timing.
“The post Labor Day outlook, with 9 days to the Sep. FOMC, remains remarkably uncertain. Volatility levels, ISM momentum and inflation expectations would point toward easing, not tightening,” analysts at Deutsche Bank said in a note.
Investors may get more clues late Tuesday, when Minneapolis Fed President Narayana Kocherlakota speaks on the outlook for U.S. monetary policy at Northwestern University in Evanston, Ill., at 5:15 p.m. Eastern Time. Kocherlakota is not a voting member of the FOMC this year.
Data: Consumer credit numbers for July are due at 3 p.m. Eastern. Ahead of the market open, the National Federation of Independent Business’s measure of small-business optimism rose slightly in August, to 95.9.
Movers & shakers: Shares of General Electric Co. GE, -2.08% rose 2.3% ahead of the bell after news the European Union is set to approve the company’s $17 billion acquisition of Alstom SA’s ALO, +0.80% power business.
Apple Inc. AAPL, -1.00% picked up 2.6% premarket a day before the tech giant is expected to unveil its iPhone 6S and iPhone 6S Plus models at its Sept. 9 hardware event.
Shares of Amazon.com Inc. AMZN, -1.13% rose 2.3% after news the online retailer plans to release a $50 tablet in time for this year’s holidays.
Walt Disney Co. DIS, -1.00% added 2%. The company said customers at Amazon and Microsoft Corp.’s MSFT, -2.05% video services from Tuesday will be able to access Disney’s digital movie collection.
In banking news, Bank of America Corp. BAC, +1.53% is stepping up efforts to convince shareholders that boss Brian Moynihan should remain both chairman and chief executive. Shares were 2.6% higher ahead of the bell.
After the market closes, digital-video recorder maker TiVo Inc. TIVO, -1.67% restaurant chain Dave & Buster’s Entertainment Inc. PLAY, +1.38% and retailer Men’s Wearhouse Inc. MW, -1.15% are slated to report earnings.
Other markets: European stocks moved sharply higher after data showed rising exports propelled Germany’s trade balance to its highest surplus on record in July.
Oil CLV5, -1.04% slumped, briefly slipping below $45 a barrel. Gold GCZ5, +0.01% inched lower, while the ICE dollar index DXY, +0.00% fell 0.1%.