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Wall Street set for lower open after strong quarterly rebound

(Reuters) – Wall Street was set to open lower on Tuesday as coronavirus-related worries and simmering U.S.-China tensions weighed on sentiment at the end of what is expected to be the S&P 500’s best quarter since 1998.

The benchmark index has rebounded about 18% since April on a raft of fiscal and monetary stimulus and the easing of restrictions, but is still down about 5% on the year as a resurgence in virus cases fuels fears of a new round of lockdowns.

With California and Texas marking a record spike in cases on Monday, investors are counting on more stimulus to shore up the domestic economy.

“While traders remain curiously cautious waiting for the next catalyst, they are also keeping risk on a short leash into the long weekend,” said Stephen Innes, markets strategist at AxiCorp.

“COVID-19 de-risking playbooks are still in play and investors are not aggressively buying dips while booking profit quickly.”

Federal Reserve Chair Jerome Powell, who is due to testify before the U.S. House of Representatives Financial Services Committee at 12:30 p.m. ET, said in prepared remarks that the outlook for the world’s biggest economy was “extraordinarily uncertain”.

Sino-U.S. tensions are heating up again with Washington beginning to eliminate Hong Kong’s special status under U.S. law in response to China’s national security law for the territory. China’s parliament passed the legislation on Tuesday and the country said it would retaliate.

“If the environment between the United States and China continues to deteriorate, the market is not going to be happy, but because very little has been known about what’s going on with those new laws, it’s not having much of an impact yet,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.

Analysts also warned of increased volatility as traders rebalance their portfolios at the end of the quarter.

Meanwhile, kicking off a data-heavy week for Wall Street, consumer confidence is expected to have climbed to 91.8 in June from 86.6 in May. Data on manufacturing activity and employment are due on Wednesday and Thursday.

At 8:34 a.m. ET, Dow e-minis 1YMcv1 were down 127 points, or 0.50%, S&P 500 e-minis EScv1 were down 11 points, or 0.36% and Nasdaq 100 e-minis NQcv1 were down 26 points, or 0.26%.

In premarket moves, Boeing Co (BA.N) tumbled 3.1% after Norwegian Air (NWC.OL) canceled orders for 97 aircraft and said it would claim compensation.

Micron Technology Inc (MU.O) jumped 5.5% as it forecast higher-than-expected current-quarter revenue on strong demand for its chips that power notebooks and data centers.

Uber Technologies Inc (UBER.N) rose 3.8% after reports said the ride-hailing services company was in talks to buy food-delivery app Postmates.

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