US pre-open: Stocks seen weaker ahead of Fed minutes

US stock futures pointed to a weaker open on Wall Street on Wednesday as investors eyed the latest minutes from the Federal Reserve and digested some disappointing data out of China.

At 1005 BST, Dow Jones Industrial Average and S&P 500 futures were down 0.3%, while Nasdaq futures were 0.5% lower. Markets were closed on Tuesday for the Independence Day holiday.

Joshua Mahony, chief market analyst at Scope Markets, said: "Wall Street is set to resume trade with some modest losses following the 4th July break, although downside pressures appear limited - at least for now.

"There are however headlines circling that could prove damaging to US-Sino relations, particularly with Washington planning to restrict China’s access to cloud services, something that could end up taking a toll on some of the tech heavyweights.

"Economic data is rather limited although US factory order numbers for May are expected to show a meaningful uptick, whilst the release of the FOMC meeting minutes later in the session will also be scrutinised to see if there are any clues as to when the Fed may finally call time on its policy tightening exercise.

"Given the run of strong data seen of late, the risk here is that the time horizon will be pushed further out. Investors will also be bracing for Q2 earnings season which kicks off properly in just over a week’s time, so anticipation here could again serve to limit upside until some numbers start to drop."

Mahony called the Dow down 82 points at 34,336 and the S&P down 12 at 4,444. The FOMC minutes are due at 1900 BST. Before that, factory orders figures for May are scheduled for release at 1500 BST.

Market participants will also be digesting data out earlier showing that activity in China’s services sector expanded at its slowest pace in five months in June.

The Caixin/S&P Global services purchasing managers' index fell to 53.9 from 57.1 in May - the lowest reading since January.

A reading above 50 indicates expansion, while a reading below signals contraction.

The composite PMI, which includes both manufacturing and services activity, fell to 52.5 from 55.6 in May.

"Employment contracted, deflationary pressure mounted, and optimism waned in the manufacturing sector," said Caixin senior economist Wang Zhe. "Meanwhile, the services sector continued a post-Covid rebound, but the recovery was losing steam."