U.S. stock futures gained early on Friday as traders looked to see whether the S&P 500 would drop into bear market territory.
Futures related to the Dow Jones Industrial Average climbed 196 points, or 0.63 percent . S&P 500 futures traded 0.76 percent higher, while Nasdaq 100 futures gained 1.06 percent .
Those changes occurred after another dismal day on Wall Street. The Dow and Nasdaq, however, lost 0.8 percent and 0.3 percent , respectively.
The S&P 500 lost 0.6 percent and is presently 18.6 percent below a record closing high established in early January. The index is also more than 19 percent below an intraday all-time high hit earlier this year. At such levels, the benchmark index is within a stone’s throw of entering a bear market — defined by many on Wall Street as a 20 percent loss from a 52-week high.
Stocks have been under pressure this week — with the S&P 500 and Nasdaq each losing more than 3 percent and the Dow falling 2.9 percent — as the latest quarterly figures from big box retailers such as Walmart and Target raise concerns about a weakening consumer base and the ability for companies to deal with decades-high inflation. Target and Walmart are down substantially after publishing their quarterly earnings this week.
“While multiple cross-currents are influencing the current sell-off, the main reason of the recent acceleration in the market drops focuses around worries about the U.S. consumer,” Glenview Trust CIO Bill Stone stated. “For the first time in the post-Covid era, merchants have been faced with some extra stocks. Costs linked to inflation are also taking their toll on their incomes.”
“Lastly, there is evidence that the lower-end consumer is feeling the pressure from the rise in costs,” Stone added.
Ross Stores was the latest store to plummet after announcing profits. The stock was down more than 22 percent in after-hours trade. CEO Barbara Rentler remarked that “after a stronger-than-planned start early in the period, revenues underperformed for the remainder of the quarter.”
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Meanwhile, the Federal Reserve has hinted it would continue to boost interest rates as it seeks to moderate the current inflationary spike. Earlier in the week, Chair Jerome Powell said: “If it entails pushing beyond commonly accepted levels of neutral, we won’t hesitate to do so.”
That hardline approach on monetary policy has fuelled anxiety this week that the Fed’s policies might tilt the economy into a recession. On Thursday, Deutsche Bank suggested the S&P 500 may fall below 3,000 if there is an immediate recession. That’s 23 percent below Thursday’s closing.
Stocks have battled to find their footing for about two months, with the Dow on track for its eight straight weekly drop. The S&P 500 and Nasdaq were set for a seven-week losing run.