Futures drop as markets brace for data-heavy week

US stock index futures traded lower on Tuesday as caution prevailed ahead of a slew of economic data reports due through the week that could influence the extent of monetary policy easing by the Federal Reserve this year.

The blue-chip Dow and the benchmark S&P 500 recovered from early August's losses and ended higher on Friday, notching their fourth-straight month in gains, after data pointed to a robust economy and moderating price pressures.

The Dow is at a record high and the S&P 500 is within 1 per cent of its own milestone as markets enter into what has been a historically weak month for the main indexes on average.

Traders continue to scour for reassuring signs about the economy, with the release of the monthly ISM manufacturing survey due at 10 am ET. Economists forecast the manufacturing index to rise to 47.5, but remain in contractionary territory.

A number of labor market numbers will also be parsed through the week, ahead of Friday's non-farm payrolls figure for the previous month. The jobs market has come under greater scrutiny, after July's report hinted at a greater-than-expected slowdown, that consequently sparked a global selloff in riskier assets.

The central bank's meeting later in the month will be closely observed, following Chair Jerome Powell's recent support for forthcoming policy adjustment. Odds of a 25-basis point interest rate cut are at 69 per cent, according to the CME Group's FedWatch Tool, while those for a bigger 50 bps reduction are at 31 per cent.

At 05:30 a.m. ET, Dow E-minis were down 178 points, or 0.43 per cent, S&P 500 E-minis were down 30 points, or 0.53 per cent, Nasdaq 100 E-minis were down 161 points, or 0.83 per cent.

Rate-sensitive chip stocks led premarket declines, with Nvidia down 2.3 per cent, Broadcom dropping 1.8 per cent, Advanced Micro Devices losing 1.3 per cent, after the Philadelphia SE Semiconductor index's 2.6 per cent jump on Friday.

Among others, Tesla added nearly 1 per cent, after a report said it plans to produce a six-seat variant of its Model Y car in China from late 2025. Separately, the automaker's sales in China logged their best month for the year so far in August.

Boeing lost 2.6 per cent after brokerage Wells Fargo downgraded the planemaker to "underweight" from "equal weight".

US Steel dropped 5 per cent after Democratic presidential candidate Kamala Harris expressed her concern about the steel firm being acquired by Japan's Nippon Steel.