(Reuters) – Wall Street was set to open lower on Monday, after Citigroup kicked off the earnings season on a dour note, adding to worries over a slowdown in global economic growth that resurfaced after data showed an unexpected drop in China’s trade.
Citigroup Inc fell 0.7 percent in premarket trading after reporting a surprise drop in quarterly revenue, hurt by volatility in financial markets at the end of the year.
Other U.S. banks including JPMorgan Chase & Co, Goldman Sachs Group Inc, Morgan Stanley and Bank of America Corp dropped between 0.8 percent and 1.1 percent. They are set to report later this week.
Sentiment was already weak after dismal December trade readings from China reinforced concerns that U.S. tariffs on Chinese goods are taking a toll on the world’s second-largest economy, prompting profit warning from companies such as Apple Inc.
Shares of chipmakers, which get a large portion of their revenue from China, took a hit. Advanced Micro Devices Inc and Micron Technology Inc fell 1.4 percent and 3.0 percent respectively.
Shares of trade-sensitive Boeing Co fell 1.4 percent and those of Caterpillar Inc were down 1.6 percent.
Another negative for the markets was a partial U.S. government shutdown, which entered its 24th day, making it the longest shuttering of federal agencies in U.S. history as an impasse over Trump’s demand for funds to build a wall along the U.S.-Mexico border dragged on.
“The market has just recouped to a level where you are starting to see some profit taking so any concerns relating to China, trade or the government shutdown will probably weigh on the market more than it would’ve last week,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.
“We’re seeing some cautiousness heading into the beginning of earnings season as people are worried about guidance and what companies are going to say, especially in relation to trade.”
At 8:43 a.m. ET, S&P 500 e-minis <ESc1> were down 0.72 percent. Dow e-minis <1YMc1> were down 0.74 percent while Nasdaq 100 e-minis <NQc1> were down 0.87 percent.
Analysts expect S&P 500 companies to post a 14.5 percent growth in fourth-quarter earnings, according to IBES data from Refinitiv. Profit for 2019 is likely to increase by 6.4 percent this year, much slower than 23.5 percent growth in 2018.
Still, optimism over China-U.S trade and hopes of a slow pace of interest rate hikes from the Federal Reserve has fueled a strong run in stocks recently, pulling the S&P 500 10 percent higher from its 20-month low hit on Christmas Eve.
The benchmark index is 12.9 percent away from its Sept 20 closing high.
Among other stocks, PG&E Corp plunged 46.6 percent after the biggest U.S. power utility said it is preparing to file for Chapter 11 bankruptcy for all of its businesses.
(Reporting by Medha Singh and Amy Caren Daniel in Bengaluru; Editing by Anil D’Silva)