US stock futures stumbled in Thursday’s morning trading as optimism around declining inflation waned and investors sifted through a motley collection of corporate earnings.
Futures linked to the S&P 500 (^GSPC) fell 0.6%, while contracts on the Dow Jones Industrial Average (^DJI) fell the same percentage, or about 190 points. Futures on the tech-focused Nasdaq Composite (^IXIC) fell 0.7%.
A recent uptrend in stock markets lost momentum after strong retail data in October dashed hopes of a central bank policy change, recently rekindled by a series of lighter inflation reports. A missed profit from Target also weighed on sentiment during Wednesday’s session, with the company citing inflation and a deteriorating economic backdrop ahead of its main Christmas shopping season.
Other peers outperformed during the period.
Macy’s (M) shares rose more than 9% above the open after the department store giant beat estimates and raised its full-year profit expectations, supported by strong demand in the luxury areas of its business. Kohl’s (KSS), meanwhile, beat earnings expectations but retracted its full-year guidance due to “significant” macroeconomic headwinds and the unexpected transition of its CEO. Shares fell 4% pre-market.
Shares of Bath & Body Works (BBWI) rose nearly 22% during extended trading on Thursday after the personal care and home fragrance maker raised its full-year earnings outlook. Retailers Walmart (WMT), Lowe’s (LOW), Home Depot (HD) all beat analyst estimates.
Elsewhere, as earnings season reaches its final stretch, Nvidia (NVDA) Chief Executive Officer Jensen Huang said strong demand for chips will see the company through potential economic challenges — an insurance policy enough to offset losses in its gaming business. Shares were up about 1.5% before the open.
Machine builder Cisco Systems (CSCO) saw shares rise 4% in pre-market hours after the company posted a positive revenue outlook and said it was downsizing its workforce and shrinking office space.
Meanwhile, in Washington DC, Republicans won a majority in the House of Representatives on Wednesday, resulting in divided control of the US Congress — a positive sign for investors, as stocks have historically outperformed in times of political stalemate.
Still, strategists have argued that inflation and economic conditions remain key concerns for markets. Principal Asset Management Chief Global Strategist Seema Shah said the outcome “should be largely irrelevant to the broad market outlook”.
“Instead, it is historically high inflation, the Fed’s inflation response and the resulting risk of a recession, coupled with major structural policy decisions, that will determine the direction of the market.”
On that front, investors are in for a fruitful day from Fedspeak, with several members of the Federal Reserve set to make public comments across the country on Thursday.
Mary Daly, president of the San Francisco Federal Reserve Bank, said in an interview with CNBC on Wednesday that an interest rate pause is not an option right now, while signaling that the federal funds rate could reach the 4.75%-5.25% range.
Federal Reserve Governor Christopher Waller said Wednesday that recent economic data has made him more comfortable with the possibility of a 50 basis point hike at the central bank’s meeting in December.
Goldman Sachs, which forecasts a 0.50% increase next month, added another quarter-point increase to its outlook in May 2023, raising its expectations for the top federal funds rate to 5-5.25%.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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