US stock futures fell in morning trading Thursday as optimism about easing inflation and the Federal Reserve’s policy downturn waned along with a variety of corporate earnings.
Futures tied to the S&P 500 (^GSPC) sank more than 1%, while contracts on the Dow Jones Industrial Average (^DJI) fell by nearly the same percentage, or more than 300 points. Futures for the technology-focused Nasdaq Composite (^IXIC) fell 1.2%.
Comments from St. Louis Federal Reserve President James Bullard weighed on investor sentiment Thursday morning as he noted that the Fed’s monetary tightening campaign has so far had “limited effects” on observed inflation and that even “cautious” policy from here would need to. To increase the federal funds rate by at least another percentage point.
Investors are in for a prolific day of Fedspeak, with several federal policymakers scheduled to make public remarks across the country on Thursday.
In the spotlight of the economic data, unemployment insurance filings tumbled last week, holding near historic lows even as a wave of tech companies reported plans to lay off workers. Labor Department data Thursday showed that initial jobless claims, a more timely snapshot of the labor market, came in at 222k for the week ended November 12, a decrease of 4,000 from the previous week.
The recent bull run in stock markets has lost steam after strong October retail data offset hopes for a shift in central bank policy, which has recently been reignited by a series of softer inflation reports. Loss of profit from Target also weighed on sentiment in Wednesday’s session, as the company cited inflation and a worsening economic backdrop ahead of the main holiday shopping season.
Their peers in the sector performed better during the period.
Shares of Macy’s (M) rose more than 9% before opening after the department store giant beat estimates and raised full-year earnings guidance, helped by strong demand in the luxury areas of its business. Meanwhile, Kohl’s (KSS) beat earnings forecasts but fell behind its full-year forecast due to “significant” macroeconomic headwinds and the unexpected relocation of its CEO. The shares fell 4% before being marketed.
Shares of Bath & Body Works (BBWI) rose nearly 22% in extended trading Thursday after the personal care products and home fragrance company raised its full-year earnings forecast. Retailers Walmart (WMT), Lowe’s (LOW) and Home Depot (HD) beat analyst estimates.
Elsewhere, as earnings season drew to a close, Nvidia (NVDA) CEO Jensen Huang said strong demand for chips would help the company weather potential economic challenges — a guarantee that was enough to offset losses in the gaming business. Shares rose about 1.5% before the open.
Machine maker Cisco Systems (CSCO) saw shares rebound 4% in pre-market hours after the company provided a positive revenue forecast and said it would cut its workforce and reduce office space.
Meanwhile in Washington, D.C., Republicans won a majority in the House of Representatives on Wednesday, splitting control of the US Congress — a positive sign for investors as stocks have historically fared better in times of political gridlock.
However, the strategists emphasized that inflation and economic conditions remain the focus of the markets. Seema Shah, global chief strategist of Asset Management, said the result should be “largely irrelevant to broad market expectations”.
“Instead, it is historically high inflation, the Fed’s response to inflation, and risks from a recession, along with key structural policy decisions, that will determine the direction of the market.”
On this front, Mary Daly, President of the Federal Reserve Bank of San Francisco, stated in an interview with CNBC that halting the interest rate is not currently an option while noting that the fed funds rate could reach a range of 4.75%-5.25%.
But Federal Reserve Chairman Christopher Waller said on Wednesday that recent economic data makes him more comfortable with the prospect of a 50 basis point increase at the December central bank meeting.
Goldman Sachs, while expecting a 0.50% rise next month, added another quarter-point increase in May 2023 to its forecast, raising its forecast for the peak fed funds rate to 5-5.25%.
Alexandra Semenova is a correspondent at Yahoo Finance. Follow her on Twitter @employee
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