By Sagarika Jaisinghani and Medha Singh
(Reuters) - Wall Street was set to pull back on Tuesday as President Donald Trump's moves to force China-owned TikTok into a sale of its U.S. operations drew a sharp rebuke from Beijing, ratcheting up tensions as the world slides into a pandemic-fuelled recession.
Friction between the world's top two economies took a back seat in the first half of 2020 as the COVID-19 pandemic crushed global growth, and an escalation now would hamper the recovery of some exporters and importers and fan fears of a deeper economic slump.
With Microsoft Corp (O:MSFT) looking to buy short-video app TikTok's U.S. operations, Trump said on Monday the U.S. government should get a "substantial portion" of any deal price. On Tuesday, state-backed newspaper China Daily said the country will not accept the "theft" of the technology company.
Microsoft's shares were down 1.6% in premarket trading after surging more than 5% on Monday as the company confirmed it was pursuing a deal with TikTok.
"It will be interesting to see if Microsoft will be able to buy TikTok," said Stephen Lee, portfolio manager at Logan Capital Management in Newtown Square (NYSE:SQ), Pennsylvania.
"(But) in the short term, we are more concerned with how soon the consumer is adapting and getting back to engaging with the economy."
The S&P 500 closed Monday within 3% of its all-time high, powered over the past four months by a stimulus-led rebound and a rally in tech-related stocks including Apple Inc (O:AAPL), Netflix Inc (O:NFLX) and Amazon.com Inc (O:AMZN).
At 8:29 a.m. ET, Dow e-minis <1YMcv1> were down 66 points, or 0.25%, S&P 500 e-minis
Investors are now awaiting signs of progress in a fifth major coronavirus-aid bill with Congress set to resume talks on Tuesday to narrow gaping differences.
In earnings-driven moves, Insurer American International Group Inc (N:AIG) fell 2.2% after posting a 56% slump in quarterly adjusted profit, while Spirit AeroSystems (N:SPR) dropped 4.6% on posting a bigger-than-expected quarterly loss.
Ralph Lauren Corp (N:RL) slid 5.6% after it missed estimates for quarterly revenue.
Take-Two Interactive Software Inc (O:TTWO) rose 4.6% as it raised its annual adjusted sales forecast on demand for its videogame franchises "Grand Theft Auto" and "NBA 2K".
Rival Activision Blizzard Inc (O:ATVI) gained 3.4% ahead of its results due after the closing bell.
About 83% of the 322 companies in the S&P 500 that have reported quarterly results so far have beaten estimates for earnings, according to IBES Refinitiv data.
Walt Disney Co (N:DIS), Fox Corp (O:FOXA) and Wynn Resorts Ltd (O:WYNN) are also expected to report quarterly results later in the day.