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Futures fall as weak data fuel recession worries, Fed comments on tap


Traders work at the post where Carvana Co. is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2022. REUTERS/Brendan McDermid

U.S. stock index futures fell on Thursday after weak economic data fueled recession worries, while investors await comments from more Federal Reserve officials for clues on the central bank’s path of monetary tightening.

Data on Wednesday showed retail sales, producer prices and production at U.S. factories fell more than expected in December, while November output was also weaker, adding to worries of a slowdown in the economy.

This led to the S&P 500 (.SPX) and the Dow (.DJI) logging their biggest daily percentage declines in over a month in the previous session, with comments from Fed speakers that highlighted the disparity between the central bank’s estimate of its terminal rate and market expectations.

St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester stressed on the need to raise rates beyond 5% to bring inflation to heel, while money markets see the rate peaking at 4.85% by June, with a 25-basis point rate hike baked in for February.

“For once bad news really was bad news because of the implications it might have for interest rates. Weak retail sales suggested consumers’ resilience may have been pushed beyond breaking point,” said Russ Mould, investment director at AJ Bell.

“This undermined the hypothesis of a ‘soft landing’ for the U.S. economy.”

December’s housing starts number, weekly jobless claims and Philadelphia Fed’s Manufacturing Survey for January, due at 8:30 a.m. ET, will provide more clues on the strength of the U.S. economy.

Investors are also focused on the fourth-quarter earnings season, with Netflix Inc (NFLX.O), American Airlines Group Inc (AAL.O), Procter & Gamble Co (PG.N) and Truist Financial Corp (TFC.N) among companies reporting results on Thursday.

Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.6% for the quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.

At 5:32 a.m. ET, Dow e-minis were down 173 points, or 0.52%, S&P 500 e-minis were down 21.25 points, or 0.54%, and Nasdaq 100 e-minis were down 69.5 points, or 0.61%.

Tesla Inc (TSLA.O) fell 2% in premarket trading, leading declines among its growth peers Apple Inc (AAPL.O), Inc (AMZN.O) and Microsoft Corp (MSFT.O), whose shares were down between 0.6% and 1.0%.

Piper Sandler cut the target price on electric-vehicle maker Tesla’s stock to $300 from $340.