Futures slip, with Wall Street set to give back some of May’s strong gains

U.S. stock futures fell on Sunday night as Wall Street was set to kick off June trading on a sour note after consecutive monthly gains.

Dow Jones Industrial Average futures traded 39 points lower, or 0.15%. S&P 500 and Nasdaq 100 futures slid 0.2% each.

Here’s what traders were monitoring heading into the new month:

• States continue to reopen their economies after the coronavirus pandemic forced the country to shutter nonessential businesses. The reopening is now taking place amid widespread protests across the U.S. over police brutality. 
• Traders are also grappling with rising tensions between China and the U.S. President Donald Trump said Friday the U.S. would end its special treatment towards Hong Kong.
• The announcement came after China had approved a national security bill that would increase the mainland’s power over the city. However, Wall Street breathed a sigh of relief as Trump did not say he would pull the U.S. out of the phase one trade deal reached earlier this year.  
• Disappointing trial results from Pfizer for a breast cancer drug dampened market sentiment. The company made the announcement Friday evening, sending its stock down more than 6% in after-hours trading. 

“Nothing that has happened since the market closed on Friday has been market positive,” said Art Hogan, chief market strategist at National Securities. “When you think about clearly we’re beginning to take U.S.-China tensions seriously and you add on to that the massive amount of disruption going on in almost every major city in the country right now, none of that could be seen as market positive.”

“At the levels we’re at, I wouldn’t be surprised to see the market take a pause and pull back,” Hogan added.

The S&P 500 and Dow each gained at least 3% last week while the Nasdaq Composite advanced 1.8% to close out May. Those gains were propelled by increasing bets by traders that the global economy will successfully reopen after the coronavirus forces a shutdown of most economic activity.

Last week’s gains led the major averages to their first back-to-back monthly advances since late 2019. The Dow and S&P 500 gained 4.3% and 4.5%, respectively, for May while the Nasdaq Composite advanced 6.8%.

That advance also put the S&P 500 up 38% from its intraday low set on March 23.

“The main downside risk facing stocks is a second wave of the disease,” said Peter Berezin, chief global strategist at BCA Research, in a note to clients. “If fears of a new outbreak were to escalate, risk assets would suffer.”

Berezin added, however, he recommends a “modest overweight” portfolio allocation to stocks, noting: “Even if a vaccine does not become available later this year, increased testing should allow for a more economically palatable approach to containment strategies.”

More than 6 million coronavirus cases have been confirmed globally, including over 1.7 million in the U.S., according to Johns Hopkins University. However, Novavax said last week is started Phase 1 clinical trials for its coronavirus vaccine candidate while Moderna said May 18 its early stage vaccine trial had yielded positive results.

—CNBC’s Patti Domm contributed to this report.

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