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

How are stock-index futures trading

• S&P 500 futures
  ES00,
  -0.69%
  fell 32.25 points, or 0.8%, to 3,913.50.

• Dow Jones Industrial Average futures
  YM00,
  -0.66%
  fell 269 points, or 0.8%, to 33,117.

• Nasdaq 100 futures
  NQ00,
  -0.75%
  eased 102 points, or 0.9%, to 11,373.75,

On Wednesday, the Dow Jones Industrial Average
DJIA,
-1.81%
fell more than 600 points, or 1.8%, while the the S&P 500
SPX,
-1.56%
shed 1.6% and the Nasdaq Composite
COMP,
-1.24%
declined 1.2%. 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

Sentiment was hit Wednesday 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.

On Thursday, good news for the economy also appeared to be bad news for stocks after first-time claims for unemployment benefits unexpectedly fell by 15,000 to 190,000, the lowest reading since September. Construction on new U.S. homes fell a seasonally adjusted 1.4% in December to 1.38 million, the Commerce Department said Thursday. 

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, though Dallas Fed President Lorie Logan said the Fed should slow down the pace of its interest-rate hikes until more data shows where the economy is headed.

Fed speakers for Thursday includes Boston Fed President Susan Collins, Fed Vice Chair Lael Brainardand New York Fed President John Williams.

“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 index 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 reporting season to date has also constrained bullish impulses.

Companies in focus

• Procter & Gamble
  PG,
  -2.70%
  fell after the consumer goods giant reported fiscal second-quarter profit that matched expectations, but volume that fell more than some analysts had forecast.

• Alcoa
  AA,
  -2.57%
  was lower after the aluminium maker reported a second consecutive quarterly loss, saying it has tried to lessen the impact throughout the year of high costs for raw materials and energy and lower prices for its alumina and aluminum.