S&P 500, Dow set for tepid open as Sino-U.S. ties worsen

(Reuters) – The S&P 500 and Dow were set to open lower on Wednesday as an escalation in tensions between United States and China offset optimism about another round of fiscal stimulus for the virus-stricken economy.

Washington has told China to close its consulate in Houston, both countries said on Wednesday, deepening a deterioration in bilateral relations, and a source said Beijing was considering shutting down the U.S. consulate in Wuhan.

The move was made “in order to protect American intellectual property and American’s private information”, U.S. State Department spokeswoman Morgan Ortagus said in a statement.

“We have enough uncertainty related to the coronavirus and the heating up of dispute between China and U.S. is not helping matters,” said Sam Stovall, chief investment strategist at CFRA Research in New York.

The news comes after three straight days of gains for the S&P 500 and record highs for the tech-heavy Nasdaq, on hopes for an eventual COVID-19 vaccine and a batch of positive quarterly results.

The benchmark index is about 4% below its record closing high hit in February.

As the second-quarter earnings season continues, investors are looking for clues to gauge how long it would take for companies to emerge from the economic damage due to the pandemic.

U.S. Republicans and Democrats remained far apart on Tuesday on how much to spend on the next round of coronavirus relief as they raced to craft a legislation before unemployment insurance for Americans thrown out of work expire by the end of this month.

Chipmaker Texas Instruments Inc (TXN.O) rose 1.3% as it forecast third-quarter revenue above estimates, while network security provider Check Point Software Technologies Ltd (CHKP.O) gained 6.1% after reporting a better-than-expected quarterly net profit.

Both the companies benefited from a global shift to work-from-home during the pandemic.

“One reason for the enthusiasm that investors have had with tech stocks is because they are coming through in terms of maintaining their earnings growth and advancing revenue increases,” Stovall said.

Investors will also keep an eye out for quarterly results from Tesla Inc (TSLA.O) and Microsoft Corp (MSFT.O) after markets close.

At 8:17 a.m. ET, Dow e-minis 1YMcv1 were down 40 points, or 0.15% and S&P 500 e-minis EScv1 were down 3.5 points, or 0.11%. Nasdaq 100 e-minis NQcv1 were up 24 points, or 0.22%.

Pfizer Inc (PFE.N) jumped 4.8% as the drugmaker and German biotech firm BioNTech SE (22UAy.F) said they would get $1.95 billion from the U.S. government to produce and deliver 100 million doses of their COVID-19 vaccine candidate.

Snap Inc (SNAP.N) declined 6.8% as it forecast fewer current-quarter users than estimates and said the initial lift in user growth at the start of coronavirus-led lockdowns dissipated faster than it expected.

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