Friday May 6th

U.S. stock index futures were lower in early morning trading Friday after the Dow Jones Industrial Average posted its worst day since 2020. Futures on the Dow Jones Industrial Average were down 132 points, or 0.4%. S&P 500 futures traded 0.5% lower, and Nasdaq 100 futures fell 0.8%. The moves came after stocks sold off sharply on Thursday’s. The Dow lost more than 1,000 points, and the tech-heavy Nasdaq Composite fell nearly 5%. Both indexes notched their worst single-day drops since 2020. The S&P 500 fell 3.56%, its second-worst day of the year. Thursday’s losses erased Wednesday’s big post-Federal Reserve meeting rally. Fed Chair Jerome Powell ruled out the prospect of larger rate hikes on Wednesday, sending the S&P 500 and the Dow to their best daily gains since 2020. “The widely anticipated relief rally seen in equities and bonds post the ‘less hawkish than feared’ Fed on Wednesday was short lived,” Barclays strategist Emmanuel Cau said in a note to clients. “Although aggressive 75bp hikes going forward may be off the table, the implied policy tightening cycle ahead is still very hawkish, in our view. Unless surging inflation quickly reverses its course (watch US CPI print next Wednesday), central banks may have no other choice than slowing growth to slow inflation and stay credible.” Technology stocks bore the brunt of Thursday’s fall, with cloud companies, e-retailers and mega-cap names seeing steep declines. Futures briefly trimmed their losses after the April jobs report showed a gain of 428,000 jobs, more than the 400,000 expected by economists surveyed by Dow Jones. One weak area of the report was the labor force participation rate, which was little changed month over month and remains 1.2 percentage points below its pre-pandemic level. Economists believe that a recovery in participation could help stem the rise in wages and, by extension, inflation. “If we are to get a soft landing, we are going to have to see a recovery in participation at a pretty rapid clip,” said Luke Bartholomew, senior economist at Abrdn. Despite Thursday’s wipeout, the S&P 500 is on pace to close the week up 0.4%. The Dow is on track to finish the week marginally higher, while the Nasdaq Composite is lower by 0.1% this week so far. On the earnings front, shares of Under Armour dropped more than 15% in premarket trading after the apparel company missed estimates on the top and bottom lines. Live Nation Entertainment fell 4% after revenue came in softer than expected for the first quarter. DoorDash and Block, however, were moving higher despite missing key estimates in their reports. Shares in Asia-Pacific largely declined on Friday after an overnight drop on Wall Street sent the Dow Jones Industrial Average to its worst day since 2020. Hong Kong’s Hang Seng index led losses regionally as it fell 3.81% to close at 20,001.96. In mainland China, the Shanghai Composite slipped 2.16% to end the trading day at 3,001.56 while the Shenzhen Component shed 2.141% to 10,809.88. South Korea’s Kospi dropped 1.23% on the day to 2,644.51. Japanese stocks bucked the overall trend regionally as they returned to trade on Friday after being closed for holidays much of this week. The Nikkei 225 closed 0.69% higher at 27,003.56 while the Topix index gained 0.93% to 1,915.91. Oil prices climbed for a third straight session on Friday, shrugging off concerns about global economic growth as impending European Union sanctions on Russian oil raised the prospect of tighter supply. Brent futures rose 2%, or $2.28, to $113.18 per barrel, while U.S. West Texas Intermediate (WTI) crude advanced 2%, or $2.14, to $110.40 per barrel. Brent and WTI are on track to rise for a second week in a row, buoyed by the EU’s proposal to phase out supplies of Russian crude oil in six months and refined products by the end of 2022. It would also ban all shipping and insurance services for transporting Russian oil. Gold prices were higher on Friday but looked set for a third straight weekly loss as the U.S. dollar and Treasury yields rallied on a hawkish U.S. Federal Reserve stance. Spot gold rose 0.5% to $1,886.16 per ounce but was still down about 0.6% for the week. U.S. gold futures climbed 0.6% to $1,886.8. The dollar was headed for a fifth winning week as benchmark U.S. Treasury yields held near their highest levels since November 2018.