US pre-open: Futures sharply lower amid recession fears, tech sell-off

5th Aug 2024 12:55

(Sharecast News) - Wall Street futures were firmly in the red ahead of the bell on Monday amid fears that a potential US recession may be on the horizon.

As of 1255 BST, Dow Jones futures were down 1.94%, while S&P 500 and Nasdaq-100 futures had the indices opening 2.80% and 4.22% weaker, respectively.

The Dow closed 610.71 points lower on Friday as market participants grew concerned that the Federal Reserve Bank may be moving too slow when it comes to interest rate cuts if it wants to avoid a recession. Stocks tanked globally on Friday, while Japan's Nikkei 225 closed more than 12% lower on Monday in its worst daily showing since 1987's Black Monday crash on Wall Street.

Recessionary fears were the main reason for losses following worse-than-expected July nonfarm payrolls numbers from the Labor Department that fuelled fears that US central bank was behind the eightball when it comes to cutting interest rates to bolster an economic slowdown just a week after opting to keep its benchmark rate at the highest levels seen in 20 years.

Tech losses were also in focus as Nvidia, Apple, Tesla and Broadcom were all down more than 7% amid an ongoing rotation out of the sector.

Trade Nation's David Morrison said: "There have been a combination of factors triggering the moves. There have been some disappointing Q2 earnings reports, particularly from amongst the 'Magnificent Seven', while recent economic data releases suggest an economy that is slowing rapidly. Despite a strong Q2 GDP report, which is backward-looking anyway, last week brought poor manufacturing, labour and construction numbers, topped by Friday's weaker-than-expected payroll update. This big 'derisking' also coincides with the move into peak summer.

"At some stage, buyers will come back in to take advantage of 'knock-down' prices. But there's no sign that the major indices have stabilised yet. The bigger question is whether this bloodletting will prove sufficient to provide a basis for a resumption of the stock market rally, and ultimately fresh record highs. The alternative is that the top is in, and investors will have to adapt their outlook, and strategies, accordingly."

Elsewhere in the corporate space, BioNTech, Carlyle Group, and Domino's Pizza will all report earnings on Monday.

On the macro front, S&P Global's composite and services PMIs for last month will be published at 1445 BST, while the Institute for Supply Management's July services PMI will follow at 1500 BST.

Reporting by Iain Gilbert at Sharecast.com