Stocks May Come Under Pressure After Chinese Sell-Off - U.S. Commentary

(RTTNews) - Stocks appear poised to kick off the first trading day of the New Year with a notable move to the downside on Monday. The major index futures are currently pointing to a sharply lower open for the markets, with the Dow futures down by 293 points.

The downward momentum for the markets comes on the heels of a sell-off by Chinese stocks, as China's Shanghai Composite Index plummeted by 6.9 percent.

The steep drop by the index triggered a trading halt on the Chinese markets, with authorities utilizing new market circuit breakers for the first time.

Disappointing manufacturing data contributed to the weakness among Chinese stocks and led to worries about the global economy.

A report released by Markit and Caixin showed that their index of Chinese manufacturing activity fell to 48.2 in December from 48.6 in November. The reading below 50 indicates a continued contraction.

Data on U.S. manufacturing activity is scheduled to be released by the Institute for Supply Management shortly after the start of trading.

The ISM's manufacturing index is expected to rise to 49.2 in December from 48.6 in November, although a reading below 50 would indicate a continued contraction.

A separate report from the Commerce Department is expected to show a 0.7 percent increase in construction spending in the month of November.

While trading activity was relatively light on the last day of the year, stocks moved mostly lower over the course of the trading day last Thursday. The drop on the day extended the pullback that was seen during trading last Wednesday.

The major averages accelerated to the downside going into the close, ending the day just off their lows for the session. The Dow slumped 178.84 points or 1 percent to 17,425.03, the Nasdaq plunged 58.44 points or 1.2 percent to 5,007.41 and the S&P 500 dove 19.42 points or 0.9 percent to 2,043.94.

With the losses on the day, the major averages all moved lower for the holiday-shortened week. The Dow dropped by 0.7 percent, while the Nasdaq and the S&P 500 both fell by 0.8 percent.

However, the major averages turned in a mixed performance for the year, as the Nasdaq surged up by 5.7 percent but the Dow tumbled by 2.2 percent and the S&P 500 slid by 0.7 percent.

In overseas trading, stock markets across the Asia-Pacific region saw substantial weakness during trading on Monday. Japan's Nikkei 225 Index plunged by 3.1 percent, while Hong Kong's Hang Seng Index tumbled by 2.7 percent.

The major European markets have also moved sharply lower on the day. While the German DAX Index has slumped by 4 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index are down by 2.4 percent and 2.3 percent, respectively.

In commodities trading, crude oil futures are rising $0.69 to $37.73 a barrel after finishing the week ended December 31st down $1.06 or 2.8 percent at $37.04 a barrel. Gold futures, which fell $15.70 or 1.5 percent to $1,060.20 an ounce last week, are climbing $16.10 to $1,076.30 an ounce.

Among currencies, the U.S. dollar moved higher in the previous week, adding 0.2 percent against the yen over the week to 120.55 yen. The buck gained 1 percent against the euro to $1.0856 a euro. The dollar is currently trading at 119.32 yen and is valued at $1.0860 versus the euro.