U.S. stock index futures declined early on Thursday morning, as the S&P 500 prepares to wrap its worst first half in decades.
Futures contracts tied to the Dow Jones Industrial Average shed 363 points, or 1.2%. S&P 500 futures slipped 1.5%, and Nasdaq 100 futures pulled back by 1.9%.
Those losses came after home furnishings company RH issued a profit warning for the full year, Sweden’s central bank became the latest to hike rates. RH shares slipped more than 5% in the premarket.
“The combination of slowing growth, fading EPS prospects, and ongoing monetary tightening has been weighing on equity sentiment for months and is causing consternation again this morning,” wrote Adam Crisafulli of Vital Knowledge.
Wall Street was coming off a mixed session, with the Dow advancing 0.27% for its first positive day in three. The S&P 500 and Nasdaq Composite both posted a third straight negative day, declining 0.07% and 0.03%, respectively.
The Dow and S&P 500 are on track for their worst three-month period since the first quarter of 2020 when Covid lockdowns sent stocks tumbling. The tech-heavy Nasdaq Composite is down more than 20% over the last three months, its worst stretch since 2008.
The S&P 500 is also on track for its worst first half of the year since 1970, as myriad factors pressure markets.
“Surging inflation, the pivot in Fed policy, and historically pricey equity valuations were on the minds of investors as the year began,” noted John Lynch, chief investment officer for Comerica Wealth Management.
“[T]he combination of COVID-19 lockdowns in China and Russia’s invasion of Ukraine has escalated volatility further with investors becoming increasingly concerned about the possibility of [a] global recession sometime within the next year,” he added.
The Federal Reserve has taken aggressive action to try and bring down rampant inflation, which has surged to a 40-year high.
Federal Reserve Bank of Cleveland President Loretta Mester told CNBC that she supports a 75 basis point hike at the central bank’s upcoming July meeting if current economic conditions persist. Earlier in June, the Fed raised its benchmark interest rate by three-quarters of a percentage point, which was the largest increase since 1994.
Some Wall Street watchers are worried that too-aggressive action will tip the economy into a recession.
“We do not believe the stock market has bottomed yet and we see further downside ahead. Investors should be holding elevated levels of cash right now,” said George Ball, chairman of Sanders Morris Harris.
“We see the S&P 500 bottoming at around 3,100, as the Federal Reserve’s aggressive, but necessary inflation-fighting measures are likely to depress corporate earnings and push stocks lower,” he added.
All three major averages are on track to end June with losses. The Nasdaq Composite is on pace for a third straight month of declines. The tech-heavy index has been hit especially hard as investors rotate out of growth-oriented areas of the market. Rising rates makes future profits — like those promised by growth companies — less attractive.
The index is more than 30% below its Nov. 22 all-time high. Some of the largest technology companies have registered sizeable declines this year, with Netflix down 70%. Apple and Alphabet have each lost roughly 22%, while Facebook-parent Meta has slid 51%.
On the economic data front, weekly jobless claims will be in focus Thursday. Economists surveyed by Dow Jones are expecting 230,000 first-time filers. Personal income and spending data will also be released.
On the earnings front Constellation Brands and Walgreens Boots Alliance will post quarterly updates before the opening bell, while Micron is on deck for after the market closes.