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Dow Futures Lower Ahead of Apple Earnings, Fed; China Slumps on Tech Crackdown

Apple will lead a trio of big tech earnings after the close of trading Tuesday, while Tesla shares move higher following a record second quarter.

The Tuesday Market Minute

  • Global stocks move lower ahead of a U.S. earnings slate, with focus on growth prospects as real yields hit a record low ahead of a two-day Fed policy meeting.
  • Beijing's crackdown on education and tech firms pulls Asia stocks to a year-to-date low, while raising doubts over the near-term U.S. IPO plans of China-based stocks.
  • Apple, Microsoft, Google and Starbucks lead a busy after-the-bell session of June quarter earnings, with focus on the iPhone maker's September launch plans.
  • Collective S&P 500 profits are forecast to rise 78.1% to a share-weighted $405.8 billion.
  • Tesla shares move higher after a record second quarter, with gains capped by Elon Musk's caution on global chip shortages. 
  • U.S. equity futures suggest a softer open on Wall Street ahead of second quarter earnings from General Electric, 3M and UPS as well as durable goods orders at 8:30 am Eastern time.

U.S. equity futures slipped lower Tuesday, pulling back from another series of all time highs for the three major benchmarks, as investors looked to the start of a what could be a crucial Federal Reserve policy meeting and a trio of big tech earnings after the close of trading. 

A weaker-than-expected reading for June durable goods orders, which rose 0.8% from last year against a forecast of 2.1% gain, added to pre-market pressures. 

Stocks were also unsettled by the third consecutive session of heavy selling in China, where Beijing's crackdown on tech and education companies has pulled the CSI 300, its version of the Nasdaq, to the lowest levels of the year amid reports of stricter conditions on large companies and those seeking listings on U.S. exchanges.

Still, with benchmarks trading at all time highs, and the S&P 500 sitting on a year-to-date gain of 17.7%, domestic investors will be far more focused on the outcome of today's Fed meeting and any potential signaling on slowing its $120 billion in monthly bond purchases. 

Prior to that decision, which is expected at 2:00 PM Eastern time tomorrow, markets will navigate another busy session of June quarter earnings, with before-the-bell updates from General Electric  (GE) - Get General Electric Company (GE) Report, 3M Co  (MMM) - Get 3M Company Report and United Parcel Service  (UPS) - Get United Parcel Service, Inc. Class B Report.

GE, in fact, rose 4% in pre-market trading after topping earnings forecasts by around 2 cents per share and boosting its 2021 outlook for industrial free cash flow -- a crucial metric in CEO Larry Culp's turnaround -- to between $3.5 billion and $5 billion.

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After the close, we'll get the much-anticipated third quarter earnings update from Apple  (AAPL) - Get Apple Inc. (AAPL) Report, as well as second quarter profits from Microsoft  (MSFT) - Get Microsoft Corporation (MSFT) Report and Google parent Alphabet  (GOOGL) - Get Alphabet Inc. Class A Report.

With all that ahead, it's perhaps no surprise that investors are laying low heading into the opening bell, with futures contracts tied to the Dow Jones Industrial Average indicating a 90 point pullback and those linked to the S&P 500 priced for an 8 point retreat. 

Tesla  (TSLA) - Get Tesla Inc Report shares were active in pre-market trading, rising 1.05% to $664.50 after a record second quarter earnings report that included the clean-energy carmaker's first net income print of more than $1 billion and plans to have 'limited' production of the higher-margin Model Y in new factories in Texas and Germany before the end of the year.

The gains aren't helping the Nasdaq, however, as futures are pricing in a modest 35 point opening bell dip from last night's record close.

European stocks were also on the back foot this morning, with the Stoxx 600 benchmark down 0.7% in early Frankfurt trading, paced by declines for tech and consumer stocks.

Lysol maker Reckitt Benckiser  (RBGLY) , one of the biggest consumer packaged goods groups in the world, slumped 8.5% in London after following its larger rival, Unilever  (UN) - Get Unilever NV ADR Report, in warning that rising costs -- particularly in plastics and paper -- as well as soaring freight costs would eat into profit margins over the second half of the year.

Overnight in Asia, Japan's Nikkei 225 edged 0.49% higher on the session to close at 27,970.22 as it scooped up equity investments from the sell-off in China. Gains were capped, however, by forecasts of record rise in coronavirus infections in Tokyo that continue to cast a pall over the Olympic Games.