U.S. stock futures point to bounce, but S&P 500 facing worst week since 2020

U.S. stock index futures climbed on Friday, indicating Wall Street may try to recover some losses following another deep selloff Thursday, with comments from Federal Reserve Chairman Jerome Powell due shortly before the market opens.

How are stock-index futures trading?
  • S&P 500 futures
    ES00
    rose 0.9% to 3,705

  • Dow Jones Industrial Average futures
    YM00
    rose 247 points, 0.8%, to 30,160

  • Nasdaq-100 futures
    NQ00
    rose 1% to 11,270

On Thursday, the Dow industrials
DJIA
tumbled 2.4% to finish at 29,927.07, the lowest finish since December 2020, both for that index and the S&P 500
SPX,
which closed down 3.3% to 3,666.77. The Nasdaq Composite
COMP
fell 4.1% to 10,646.10, its lowest finish since September 2020, according to Dow Jones Market Data.

What’s driving markets?

Gains for equity index futures early Friday came against the backdrop of quadruple witching day — the simultaneous expirations of stock index futures, stock index options, stock options, and single stock futures — that can cause market volatility. As well, U.S. markets will be closed on Monday for the Juneteenth federal holiday.

Investors are still trying to come to grips with Wednesday’s Fed interest-rate hike, the biggest since 1994. Markets are facing bruising weekly losses, with the S&P 500 down 6% this week as of Thursday, and poised for its biggest weekly fall since March 20, 2020, according to Dow Jones Market Data.

A mixed bag of data this week has driven concerns that the U.S. economy is slowing, noted Saxo Bank strategists in a note Friday. Equity traders can’t decide if they should “celebrate weak data as something that will eventually lead US yields lower and see the pace of Fed tightening eventually reversing or fret weak data because of the implications for corporate profits,” they added.

Saxo said the next data points to watch will be preliminary services and manufacturing PMI surveys for June, due next week.

“The fear of recession could short-term keep a lid on interest rates and thus ironically support equities and maybe cause a mild rebound over the coming weeks. The VIX forward curve remains well behaved suggesting no panic yet in US equities,” noted Peter Garnry, head of equity strategy at Saxo Bank.

The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
continued to decline early Friday, dropping a further 9 basis points to 3.21%, after the biggest two-day drop in three months on Thursday for it and 2-year yield
BX:TMUBMUSD02Y.
The latter was holding steady at 3.154%.

On Friday, investors will also hear from Chairman Jerome Powell, who is scheduled to make opening remarks at the Inaugural Conference on the International Roles of the U.S. Dollar, at 8:45 a.m. Eastern Time.

U.S. industrial production and capacity utilization for May are due at 9:15 a.m. ET, followed by leading economic indicators at 10 a.m. ET.

And topping off a busy week for central banks was the Bank of Japan, which bucked the trend of monetary tightening by central banks this week and left key interest rates unchanged, sparking a sharp decline in the yen
USDJPY
which was last down nearly 2% at 134.80 against the dollar. BOJ Governor Haruhiko Kuroda voiced concerns about the rapid weakening of the yen in a press conference following the meeting.

Read: Here’s what’s at stake for markets as Bank of Japan sticks to its dovish path

The Swiss National Bank and Bank of England both hiked benchmark interest rates this week, while the European Central Bank announced a new mechanism to prevent yields on bonds of more indebted euro zone countries from rising too fast.

Read: ‘The opposite of policy coordination’: Swiss National Bank and Bank of England lift interest rates following Fed hikes

What companies are in focus?
  • Adobe Inc.
    ADBE
    shares fell over 3% after a revenue guidance tweak.

  • Shares of Mereo BioPharma Group
    MREO
    climbed 7% after the Times reported, without attribution, that AstraZeneca PLC
    AZN

    UK:AZN
    is considering a bid for London-based, U.S.-listed biotech.

How are other assets trading?
  • The ICE U.S. Dollar Index 
    DXY,
     a measure of the currency against a basket of six major rivals, rose 0.7%.

  • Bitcoin 
    BTCUSD
    was weaker at $20,888.

  • Oil futures were higher, with the U.S. benchmark
    CL
     up 1% at $118.82 a barrel. Gold futures 
    GC00
     were flat at $1,849.60 an ounce.

  • The Stoxx Europe 600 
    XX:SXXP
    rose 1.1%, while London’s FTSE 100 
    UK:UKX
    rose 0.7%.

  • The Shanghai Composite 
    CN:SHCOMP
    rose 0.9%, while the Hang Seng Index 
    HK:HSI
    rose 1.% and Japan’s Nikkei 225 
    JP:NIK
    fell 1.7%.

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