By Johann M Cherian
(Reuters) -Wall Street was set for a lower open on Tuesday as investors moved to the sidelines ahead of a slew of economic data reports due through the week that could influence the extent of monetary policy easing by the Federal Reserve this year.
The blue-chip Dow and the benchmark S&P 500 recovered from early August's losses and ended higher on Friday, notching their fourth straight month of gains, after data pointed to a robust U.S. economy and moderating price pressures.
The Dow is at a record high and the S&P 500 is within 1% of its own milestone as markets enter into what has been a historically weak month for the main indexes on average.
Traders continue to scour for reassuring signs about the economy, with the release of the monthly ISM manufacturing survey due at 10 a.m. ET. Economists forecast the manufacturing index to rise to 47.5, but remain in contractionary territory.
A number of labor market reports will be parsed through the week, ahead of Friday's non-farm payrolls data for August. The jobs market has come under greater scrutiny, after July's report hinted at a greater-than-expected slowdown, that consequently sparked a global selloff in riskier assets.
The U.S. central bank's meeting later in the month will be closely observed, following Chair Jerome Powell's recent support for forthcoming policy adjustment.
Odds of a 25-basis point interest rate cut are at 67%, according to the CME Group's (NASDAQ:CME) FedWatch Tool, while those for a bigger 50 bps reduction are at 33%.
"It's just speculation about the Fed. If there is any kind of economic weakness, investors believe the Fed will respond by lowering interest rates more aggressively," Sam Stovall, chief investment strategist at CFRA Research, said.
At 08:36 a.m. ET, Dow E-minis were down 208 points, or 0.50%, S&P 500 E-minis were down 27.75 points, or 0.49%, Nasdaq 100 E-minis were down 121.25 points, or 0.62%.
Rate-sensitive chip stocks led premarket declines, with Nvidia (NASDAQ:NVDA) down 2%, Broadcom (NASDAQ:AVGO) dropping 1.2% and Advanced Micro Devices (NASDAQ:AMD) losing 1.1%, after the Philadelphia SE Semiconductor index's 2.6% jump on Friday.
"With the market having been pretty strong over August, some investors are starting the month taking some profits," said Sam Stovall, chief investment strategist at CFRA Research.
Tesla (NASDAQ:TSLA) added 1.1% after a report said it plans to produce a six-seat variant of its Model Y car in China from late 2025. Separately, the automaker's sales in China logged their best month for the year so far in August.
Boeing (NYSE:BA) lost 3.7% after Wells Fargo (NYSE:WFC) downgraded the planemaker to "underweight" from "equal weight", while Unity (NYSE:U) Software jumped 7% after Morgan Stanley (NYSE:MS) upgraded the software firm to "overweight" from "equal-weight".
U.S. Steel dropped 4.4% after Democratic presidential candidate Kamala Harris expressed her concern about the steel firm being acquired by Japan's Nippon Steel.
Southwest Airlines (NYSE:LUV) rose 2.3% following a report that Elliott Investment now holds 10% of the company's shares, allowing the hedge fund to call a special meeting at the carrier.