U.S. stocks struggle for momentum as China data weighs on sentiment

What’s driving markets

Wall Street was off to a tepid start to the week, holding near 15-month highs, as disappointing news from China delivered a cautious tone across global markets.

Data showed the world’s second-largest economy grew by only 0.8% in the second quarter compared with the previous three months, slowing sharply from a 2.2% rise in the first quarter. Growth was 6.3% year-over-year, against forecasts of 7.3%.

Traders now have to decide whether to place a positive spin on the news because it may mean more stimulus from Beijing.

“On one hand, weak growth means that the government and the People’s Bank of China (PBOC) will step up efforts to further ease the financial conditions and pave the way for a quicker recovery,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“On the other hand, supportive policies put in place so far have had little impact. The Chinese property downturn, risk of disinflation, and falling exports have been difficult to reverse. As a result, the knee-jerk reaction in markets was unenthusiastic,” she added.

The risk-off mood could be seen in industrial commodities sensitive to perceptions of Chinese demand, with oil
CL.1,
-1.01%
and copper
HG00,
-2.83%
prices lower.

Meanwhile, the U.S. second-quarter earnings season faces a somewhat quieter session Monday after Friday’s big bank kickoff. First Bank
FBK,
+1.59%
and Home Bank
HBCP,
+0.70%
are among those delivering their results.

The next few days are nevertheless stuffed with potential market catalysts, analysts noted.

“Further reports this week will come at a brisk pace, with updates from the likes of Tesla
TSLA,
+3.35%,
Morgan Stanley
MS,
+0.68%,
Goldman Sachs
GS,
-0.08%,
Netflix
NFLX,
+2.41%
and Bank of America
BAC,
+1.12%.
On the economic calendar, U.S. retail sales will provide more color as to the behavior of the vitally important consumer,” said Richard Hunter, head of markets at Interactive Investor.

But the slight decline at the end of last week has done little to dent the strong performance this year, with the S&P 500 up 17% and the Nasdaq Composite rising 35%.

The New York Fed’s Empire State business conditions index, a gauge of manufacturing activity in the state, fell 5.5 points in July to 1.1, the regional Fed bank said Monday. 

Economists had expected a flat reading, according to a survey by The Wall Street Journal. A reading above zero indicates improving conditions.

Companies in focus

• Shares of Activision Blizzard Inc.
  ATVI,
  +2.91%
  jumped 3% after a federal appeals court late Friday denied the Federal Trade Commission’s bid to temporarily block Microsoft Corp.’s
  MSFT,
  -0.57%
  acquisition of the videogames maker. Microsoft shares were flat.

• Tesla Inc. shares were up more than 3% after the first Cybertruck rolled off the assembly line Saturday in Austin, Texas, following years of delays.

• Shares of Ford Motor Co.
  F,
  -4.07%
  dropped 5% after the automaker said it was cutting prices on its F-150 Lightning electric trucks by as much as 17% for some models.