U.S. stock futures signal further losses amid resurgent recession fears

U.S. stock futures were softer Thursday as caution reigned following the heaviest sell-off so far this year as worries grow about a weakening economy.

How are stock-index futures trading
  • S&P 500 futures
    ES00,
    -0.69%
    dipped 12 points, or 0.3%, to 3934

  • Dow Jones Industrial Average futures
    YM00,
    -0.65%
    fell 125 points, or 0.4%, to 33261

  • Nasdaq 100 futures
    NQ00,
    -0.79%
    eased 18 points, or 0.2%, to 11458

On Wednesday, the Dow Jones Industrial Average
DJIA,
-1.81%
fell 392 points, or 1.14%, to 33911, the S&P 500
SPX,
-1.56%
declined 8 points, or 0.2%, to 3991, and the Nasdaq Composite
COMP,
-1.24%
gained 16 points, or 0.14%, to 11095. The S&P 500’s decline was its biggest since December 15, chopping its gain for the year to just 2.3%.

What’s driving markets

Markets remain cautious after Wall Street on Wednesday suffered its worst decline in more than a month.

Sentiment has been hit by further signs of a weakening U.S. economy after data showed retail sales fell more than expected, industrial production slumped, and Microsoft
MSFT,
-1.89%
confirmed it would shed 10,000 jobs.

Sovereign bond yields fell in response — pressured further by data showing lower factory gate prices — but their inverse relationship to stocks appears to be dislocated for the time being, analysts noted.

“Although Treasuries were rallying, the risk-off tone meant that U.S. equities were much less resilient…as recession concerns mounted,” said Henry Allen, strategist at Deutsche Bank.

“The [economic] bad news would normally be good news for the stocks, if the Federal Reserve (Fed) members weren’t there to spoil the dovish Fed expectations by saying that the U.S. rates should go higher,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester both reiterated on Wednesday that they thought interest rates needed to go higher still to ensure inflation falls back to the central bank’s 2% target.

Fedspeak for Thursday includes Boston Fed President Susan Collins at 9 a.m., Fed Vice Chair Lael Brainard at 1:15 p.m. and New York Fed President John Williams at 6:35 p.m..

“The S&P 500 didn’t like the mix of slowing economic data and still a hawkish Fed,” Ozkardeskaya added.

Of particular concern to equity bulls is that the S&P 500 failed to break decisively above the 4,000 level and has been rebuffed again by its 200-day moving average, meaning the bear market downtrend remains intact.

A mixed fourth quarter earnings season to date has also constrained bullish impulses. Companies reporting their numbers on Thursday include Netflix
NFLX,
+0.03%
and Proctor & Gamble
PG,
-2.70%.
The Netflix report comes after the close.

U.S. economic updates set for release on Thursday include weekly initial jobless claims, building permits and housing starts for December, and the Philadelphia Fed manufacturing index, all due at 8:30 a.m. Eastern.

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