A Wall Street sign is pictured outside the New York Stock Exchange amid the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., April 16, 2021.
A Wall Street sign is pictured outside the New York Stock Exchange amid the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., April 16, 2021. Reuters / Carlo Allegri

U.S. stock indexes were set to fall at the open on Tuesday, with investors fretting about the possibility of an economic recession as central banks across the world take aggressive actions to contain a surge in inflation.

As the Federal Reserve moves away from easy-money policy by raising borrowing costs, the raging bull market of the last few years has hit pause, dragging the benchmark S&P 500 index to its steepest first-half percentage drop since 1970.

Traders are now bracing for another 75 basis point hike at the end of the month.

Investors will also parse economic data and company commentaries for signs of peaking inflation and cooling economic growth, as trading commences after a long weekend and with the earnings season just weeks away.

"Recession concerns are dominating the market," said Sam Stovall, chief investment strategist at CFRA.

"The real question is if the economy is slowing, then by how much will second-quarter earnings or guidance disappoint. People are waiting until they get some news that could serve as a catalyst."

Data on Tuesday showed business growth across the euro zone slowed further last month and forward-looking indicators suggested the region could slip into decline this quarter as the cost of living crisis keeps consumers wary.

On the U.S. side, a Commerce Department report is expected to show factory orders likely advanced 0.5% in May, compared with a 0.3% rise in April. The data is due to at 10:00 a.m. ET, or 1400 GMT.

Ten-year U.S. Treasury yields rose on Tuesday and a key part of the yield curve briefly inverted, reflecting investor concerns about a potential U.S. economic recession.

Amazon.com, Microsoft Corp and Alphabet Inc - mega-cap growth stocks seen as sensitive to interest rates - fell between 1.2% and 1.6% premarket.

At 8:23 a.m. ET, Dow e-minis were down 308 points, or 0.99%, S&P 500 e-minis were down 40.5 points, or 1.06%, and Nasdaq 100 e-minis were down 145.75 points, or 1.26%.

Shares of Tesla Inc fell 1.9% as the company's second-quarter electric vehicle deliveries fell, compared with the previous quarter due to supply-chain challenges.

Shares of Warner Bros Discovery Inc dropped 1.8% after reports of the media and streaming firm's unit, HBO Max, halting production of original shows in Europe.

Occidental Petroleum rose 1.1% after Warren Buffett's Berkshire Hathaway boosted its stake in the shale producer, buying nearly 10 million shares.