Dow Jones, S&P 500 and Nasdaq futures are currently pointing to a lower open on Friday, with stocks likely to move back to the downside after recovering from an early sell-off to end the previous session mostly lower but well off their worst levels.
Renewed concerns about inflation may weigh on the markets after the Labor Department released a report showing producer prices increased by much more than expected in the month of December.
The Labor Department said its producer price index for final demand climbed by 0.5 percent in December after rising by 0.2 percent in November. Economists had expected producer prices to rise by another 0.2 percent.
The report also said producer prices in December were up by 3.0 percent compared to the same month a year ago, unchanged from November. The annual rate of growth was expected to slow to 2.7 percent.
New tariff threats from President Donald Trump may also generate negative sentiment, with the president threatening Canada with a 50 percent tariff on all aircraft sold in the U.S. over its refusal to certify certain Gulfstream jets.
Trump also signed an executive order that would impose tariffs on any goods from countries that sell or provide oil to Cuba.
Previously, the futures had recovered from an overnight slump after Trump announced his intent to nominate former Federal Reserve Governor Kevin Warsh to succeed Fed Chair Jerome Powell.
Dan Coatsworth, head of markets at AJ Bell, noted the choice of Warsh may be seen as a positive sign in terms of Fed independence, as he is “perceived as a more orthodox choice versus some of the other mooted names.”
Following a nosedive seen early in the session, stocks showed a substantial recovery attempt over the course of the trading day on Thursday. The major averages climbed well off their worst levels of the day, with the Dow reaching positive territory.
The Dow ended the day up 55.96 points or 0.1 percent at 49,071.56, while the S&P 500 closed down just 9.02 points or 0.1 percent at 6,969.01.
The tech-heavy Nasdaq ended the day more firmly negative, down 172.33 points or 0.7 percent at 23,685.12, although it had tumbled by as much as 2.6 percent.
The early sell-off on Wall Street came amid a steep drop by shares of Microsoft (NASDAQ:MSFT), with the software giant plummeting by 10.0 percent to its lowest closing level in nine months.
Microsoft came under pressure after the company reported slowing cloud computing growth in its fiscal second quarter and provided disappointing third quarter operating margin guidance.
“Cloud computing is closely tied to the AI story and failure to either meet or beat previous growth rates raises the risk in the market’s eye that some AI expenditure might be too high if demand is not also going through the roof,” said Dan Coatsworth, head of markets at AJ Bell.
Profit taking may also have contributed to the early weakness after the S&P 500 briefly peeked above the 7,000 level for the first time during Wednesday’s session.
Selling pressure waned over the course of the trading day, however, leading some traders to buy the dip amid ongoing optimism about the outlook for the economy.
A strong performance by shares of Meta Platforms (NASDAQ:META) may also have kept negative sentiment relatively subdued.
Meta spiked by 10.4 percent on the day after the Facebook parent reported better than expected fourth quarter results and forecast first quarter revenues above analyst estimates.
Shares of IBM Corp. (NYSE:IBM) also surged after the tech giant reported fourth quarter results that exceeded expectations on both the top and bottom lines.
Despite the recovery by the broader markets, software stocks continued to see substantial weakness, with the Dow Jones U.S. Software Index (DOWI:DJUSSW) plunging by 7.7 percent to a nine-month closing low.
The nosedive by Microsoft weighed on the sector along with a steep drop by ServiceNow (NYSE:NOW), which plummeted by 9.9 percent despite reporting better than expected fourth quarter earnings.
Considerable weakness also remained visible among gold stocks, as reflected by the 3.8 percent slump by the NYSE Arca Gold Bugs Index. The sector saw continued weakness even though the price of gold recovered from an early sell-off.
On the other hand, airline stocks moved sharply higher over the course of the session, driving the NYSE Arca Airline Index up by 2.3 percent.
Telecom, banking and commercial real estate stocks also moved notably higher as the day progressed, helping to lift the markets well off their early lows.