By Devik Jain and Aniruddha Ghosh
(Reuters) -U.S. stock indexes were set to open lower on Monday following a strong rally last week on earnings optimism, with investors awaiting a factory activity data after similar surveys from China and the Eurozone fueled recession worries.
The S&P 500 and the Nasdaq posted their biggest monthly percentage gains since 2020 in July on stronger-than-expected second-quarter results and on hopes the Federal Reserve need not to be as aggressive with interest rate hikes as some had feared.
The upbeat mood faded on Monday as surveys showed factories across Asia and Europe struggled for momentum in July as flagging global demand and China’s strict COVID-19 curbs slowed production.
The Institute of Supply Management’s manufacturing Purchasing Managers Index, due at 10 a.m. ET, is expected to show factory activity slowed in July to 52.0 from 53.0 in June, according to a Reuters poll.
“Manufacturing is a small part of the U.S. economy, but it tends to lead what you will later see in the services data, which is a bigger piece of the overall economy,” said Randy Frederick Managing Director of Trading and Derivatives at Charles Schwab.
The factory activity data will be followed by the monthly U.S. jobs report on Friday, which will be parsed for cues for the Fed’s next moves.
The U.S. central bank has raised interest rates by 2.25 percentage points so far this year and has vowed to be data-driven in its approach toward future hikes.
Worries about a recession have weighed on stock markets this year, with the benchmark index down 13.3% as investors adjust their expectations on economic growth and corporate profits in the face of tightening financial conditions.
However, the earnings season has showed companies were far more resilient in the second quarter than estimated.
Of the 279 S&P 500 companies that have reported results, 77.8% have topped profit estimates, as per Refinitiv data. The long-term average is 66.1%.
Activision Blizzard, Devon Energy and Simon Property Group are scheduled to report quarterly results later in the day.
At 8:26 a.m. ET, Dow e-minis were down 78 points, or 0.24%, S&P 500 e-minis were down 14.75 points, or 0.36%, and Nasdaq 100 e-minis were down 32.25 points, or 0.25%.
Boeing Co gained 4.7% in premarket trading after a Reuters report that the U.S. Federal Aviation Administration approved the planemaker’s inspection and modification plan to resume deliveries of 787 Dreamliners.
Global Payments Inc rose 3.5% after the fintech firm agreed to buy smaller peer EVO Payments Inc for nearly $4 billion, including debt, to expand in the business-to-business (B2B) space.
Shares of EVO Payments jumped 20.7%.
(Reporting by Aniruddha Ghosh and Devik Jain in Bengaluru; Editing by Arun Koyyur)