U.S. stock index futures weakened Tuesday, ahead of data that may show a decline in July retail sales.

What’s happening

Futures on the Dow Jones Industrial Average
YM00,
-0.56%

fell 204 points, or 0.6%, to 35,330.

S&P 500 futures
ES00,
-0.45%

fell 0.5% to 4,453.25.

Nasdaq-100 futures
NQ00,
-0.40%

were down 0.4% at 15,073.50.

U.S. stocks recovered Monday from early losses, and the S&P 500
SPX,
+0.26%

notched its 49th record close of 2021 and extending a winning run to five sessions. The Dow Jones Industrial Average
DJIA,
+0.31%

also established its fifth straight record, while the Nasdaq Composite
COMP,
-0.20%

weakened by 0.2%.

What’s driving markets

July retail sales data at 8.30 a.m. Eastern highlight a busy slate of U.S. economic releases Tuesday. Economists polled by The Wall Street Journal expect a 0.3% monthly drop in sales in July, or a 0.2% gain when autos are excluded.

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Despite recent economic reports coming in weaker than forecast in both the U.S. and China, equities have gathered strength, thanks to strong corporate earnings.

“Although it’s disquieting, strong corporate earnings, low U.S. yields and a relatively soft U.S. dollar are the major catalysts for the U.S. market rally,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “But the cliff between the economic indicators and the equity prices is somewhat unreasonable, hinting that there is potential for a sizable downside correction.”

Analysts at DataTrek Research say Wall Street estimates on S&P 500 index earnings per share, of $201 per share, are actually lower than the annualized EPS produced by companies in the second quarter, which equates to $208. “Would you sell a stock if you had a strong belief that earnings estimates were too low? Probably not. The same point goes for entire markets as well,” they said in a note to clients.

Concern about ongoing spread of the delta variant of the coronavirus that causes COVID-19 were hanging over financial markets again Tuesday. New Zealand took drastic action Tuesday, with the government putting the entire nation into a strict lockdown for at least three days after finding a single case of coronavirus infection in the community.

The Biden administration is preparing to announce that most vaccinated Americans should get a COVID-19 booster shot eight months after being fully vaccinated, the New York Times reported Monday night.

The continued spread of the virus was blamed for renewed congestion at ports in China, while contributing to worries about further lockdowns and a slowdown in economic activity around the world.

Fund managers, meanwhile, are taking slightly more defensive positions as they grow more pessimistic on the economy and corporate profits, according to the latest monthly survey conducted by Bank of America, which was released Tuesday.

Global fund managers have increased their holdings in healthcare, insurance, utilities and cash, while trimming their exposure to materials, commodities, emerging markets and energy, the survey found.

Also of note, the Hang Seng
HSI,
-1.66%

slumped 1.7% in Hong Kong and the Shanghai Composite
SHCOMP,
-2.00%

dropped 2% Tuesday after China published draft rules on competition and data security in the technology sector.

Which companies are in focus?

Shares of Walmart Inc.
WMT,
+0.82%

fell 1.5% in premarket trade, after the retailing giant reported stronger-than-expected second-quarter sales and earnings and lifted its outlook for sales growth.

Home Depot Inc.
HD,
+1.13%

shares fell more than 3%, after the home improvement retailer reported fiscal second-quarter profit and record sales that topped expectations but same-store sales that came up short

Roblox Corp.
RBLX,
-5.23%

shares fell, after the social-gaming platform’s results late Monday came in below Wall Street expectations.

What are other markets doing?

The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.220%

fell to 1.224% compared with 1.255% late Monday. Yields and debt prices move in opposite directions.

The ICE U.S. Dollar Index
DXY,
+0.11%
,
a measure of the currency against a basket of six major rivals, rose 0.1%.

Oil futures lost ground, with the U.S. benchmark
CL.1,
-0.80%

down 0.9% at $66.71 a barrel. Gold futures
GC00,
+0.26%

ticked higher, up 0.3%, at $1,795.30 an ounce.

In European equities, the Stoxx Europe 600
SXXP,
-0.05%

fell 0.1%, while London’s FTSE 100
UKX,
+0.19%

rose 0.2%.

Japan’s Nikkei 225
NIK,
-0.36%

fell 0.4%.

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