US stock futures declined in morning trade on Thursday as hopes for easing inflation faded and investors weighed on corporate earnings.
Futures tied to the S&P 500 (^GSPC) fell 0.6%, while contracts on the Dow Jones Industrial Average (^DJI) fell by the same percentage, or about 190 points. Futures on the tech-focused Nasdaq Composite (^IXIC) fell 0.7%.
The recent rally across equity markets lost steam after strong retail data in October offset expectations of a change in central bank policy, which has been ruled out recently by a series of lighter inflation reports. An earnings miss from Target also weighed on sentiment in Wednesday’s session, with the company citing inflation and a worsening economic backdrop ahead of the key holiday shopping season.
Other sector peers fared better during the period.
Shares of Macy’s ( M ) rose more than 9% ahead of the open after the department store giant beat its estimate and raised its full-year earnings guidance, due to strong demand in the luxury areas of its business. Meanwhile, Kohl’s ( KSS ) beat earnings expectations but withdrew its full-year outlook due to “significant” macroeconomic priorities and the unexpected transfer of its chief executive officer. Shares fell 4% before the market.
Shares of Bath & Body Works ( BBWI ) surged nearly 22% in extended trading Thursday after the personal care and home fragrance producer cut its full-year profit forecast. Retailers Walmart (WMT), Lowe’s (LOW), The Home Depot (HD) beat analyst estimates.
Elsewhere as earnings season nears its final stretch, Nvidia (NVDA) CEO Jensen Huang said strong chip demand will help the company through potential economic challenges – an assertion that was enough to dampen losses in offset gambling business. Shares rose about 1.5% before the open.
Machine maker Cisco Systems (CSCO) saw shares bounce 4% in pre-market hours after the company delivered a positive revenue outlook and said it was reducing its workforce and reducing office space.
Meanwhile in Washington, Republicans won a majority in the House of Representatives on Wednesday resulting in split control of the US Congress – a positive sign for investors since stocks have historically performed better in times of political need.
However, strategists asserted that inflation and economic conditions remain at the heart of markets. Global Asset Management Chief Strategist Seema Shah said the result should be “largely irrelevant to the broad market outlook.”
“Instead, historically elevated inflation, the Fed’s inflationary response, and the resulting recession risk, along with key structural policy decisions, will determine the direction of the market.”
In that regard, investors are in for a busy day of Fedspeak, and several members of the Federal Reserve are scheduled to make public comments around the country on Thursday.
Federal Reserve Bank of San Francisco President Mary Daly said Wednesday in an interview with CNBC that a rate break is not an option right now and indicated that the federal funds rate could reach the 4.75%-5.25% range.
Federal Reserve Governor Christopher Waller said on Wednesday that recent economic data makes him more comfortable with the possibility of a 50 basis point hike at the central bank’s December meeting.
Goldman Sachs, with a 0.50% rise next month, added another quarter point increase in May 2023 to its outlook, raising its expectations for the peak federal funds rate to 5-5.25%.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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