U.S. stock futures gained Friday morning, though the major indexes still headed for steep weekly losses as concerns over the resilience of corporate profits in the face of inflation resurged this week.
Contracts on the S&P 500 gained more than 1% in early trading, following equities in Asia and Europe higher after China’s central bank unexpectedly cut a benchmark interest rate to offer some relief to borrowers in the country still grappling with a widespread COVID-19 outbreak.
Contracts on the Dow rose by nearly 300 points, and Nasdaq futures gained more than 1.5%. Treasuries steadied, with the yield on the benchmark 10-year note hovering below 2.9%, and U.S. crude oil prices edged up to more than $112 per barrel.
The early gains Friday for the major U.S. stock indexes, however, did not fully offset the slide in stocks seen earlier this week. As of Thursday’s close, the S&P 500 was on track for a weekly loss of 5.4% — its biggest since January. The index was also down 18.7% from its recent record close from Jan. 3, bringing it within striking distance of a bear market, or drop of at least 20% from a recent all-time high. And the S&P 500 was also on track to post a seventh straight weekly loss, or its longest losing streak since 2001. The Dow and Nasdaq paced toward weekly losses of 5% and 6.2%, respectively.
The latest bout of volatility came in the wake of weaker-than-expected earnings results and guidance from some of the major U.S. retailers, which appeared to confirm fears that companies were having more difficulty passing on rising costs to consumers. Ross Stores (ROST) late Thursday became the latest major retailer to cut its full-year guidance, joining Walmart (WMT) and Target (TGT) in highlighting the impact inflation and supply chain disruptions have had on profitability. Shares of Ross slid more than 25% in pre-market trading, and Target and Walmart each headed for weekly losses of 30% and 20%, respectively.
“Unfortunately there’s no safe haven. When we see the news that came out of consumer discretionary and staples … that shows the struggles that companies have regardless of their size,” Eva Ados, ER Shares chief operating officer, told Yahoo Finance Live. “And ironically, these are the sectors, staples and consumer discretionary, that are viewed as safe havens in a bad economic market.”
The mounting, visible consequences of rising prices have also offered justification for the Federal Reserve to prioritize raising rates and tightening monetary policy to bring down inflation running at the highest level since the early 1980s, even at the expense of some growth in the broader economy. At the same time, however, other strategists suggested some of the factors that led to the major companies’ earnings misses this week — such as stockpiling more inventory than they could sell — could ultimately have a deflationary impact down the line even in absence of a more aggressive policy response.
“We saw retailers trying desperately to catch up to consumer demand by ordering a lot of goods. It took a long time to get through supply chains but it’s finally hit the store shelves. And now they’re finding they have a little bit too much,” Christian Ledoux, CAPTRUST director of investments, told Yahoo Finance Live.
“So we could see a deflationary effect on some of the CPI [Consumer Price Index] elements coming in the future months,” he added. “And if that does indeed come through, the Fed may feel a lot more comfortable going slower or even stopping at a lower interest rate point sometime in the future.”
7:15 a.m. ET: Stock futures head for a higher open
Here’s where markets were trading Friday morning:
S&P 500 futures (ES=F): +40.75 points (+1.05%) to 3,938.50
Dow futures (YM=F): +267.00 points (+0.86%) to 31,469.00
Nasdaq futures (NQ=F): +163.50 points (+1.38%) to 12,041.75
Crude (CL=F): +$0.24 (+0.21%) to $112.45 a barrel
Gold (GC=F): +$2.20 (+0.12%) to $1,843.40 per ounce
10-year Treasury (^TNX): +0.2 bps to yield 2.857%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.