Stock futures rise, but still head for steep weekly losses amid growth concerns


U.S. stock futures rose Friday morning as equities at least temporarily paused a downward slide, as concerns over the prospects of a recession remained elevated.

Contracts on the S&P 500 rose by about 1% before the opening bell after the index slid to its lowest level since Dec. 2020 a day earlier. The S&P 500 headed for a weekly loss of 6% — its worst since March 2020.

Dow futures gained more than 200 points, or about 0.8%, in early trading. And futures on the Nasdaq rose more than 1% as the 10-year Treasury yield pulled back to about 3.2%.

Even given Friday’s early gains, the major averages remained on track to post steep weekly losses as traders considered the likelihood and timing of a potential recession. While signals of an economic slowdown have been brewing for months now, heightened fears of a more significant downturn resurged in just the past week alone. That came especially after last Friday’s Consumer Price Index showed inflation remained at multi-decade highs even following the Federal Reserve’s initial moves earlier this year to raise interest rates and bring down demand and prices.

And with the Fed now turning even more aggressive — starting with its first 75 basis point interest rate hike since 1994 on Wednesday — the potential for a slide in economic activity as the central bank trades some growth for lower inflation appears increasingly likely.

“The market is reevaluating what the odds of a recession are in the near-term and what the actual downside on earnings and what the recession will really look like,” Ross Mayfield, Baird investment strategy analyst, told Yahoo Finance Live on Friday. “But to me, it’s a fairly kind of tidy story about higher interest rates, more aggressive Fed, and multiple times in the past that leads to some sort of financial crisis or recession. I think the market’s trying to price the odds of that.”

And that pricing recalibration has so far brought the S&P 500 24% below its Jan. 3 record closing high. But stocks likely still have further to fall if history is any indication, some strategists said.

Deutsche Bank, one of the first major banks to call for a 2023 recession earlier this year, pointed out that the S&P 500’s current decline from its peak is so far in-line with the median drop seen amid recessions post-World War II. Currently, it’s the fourth worst non-recession correction over that period, Deutsche Bank’s Jim Reid said in a note Friday morning. But when recessions materialize, bear markets for stocks tend to deepen.

“The timing of the recession is a hot topic at the moment. When it hits, both [Binky Chadha, Deutsche Bank chief U.S. equity and global strategist] and I would expect the S&P 500 to be down -35 to -40% from the highs,” Reid said. “The rationale from [Chadha] being that the initial overvaluation was more extreme than normal cycles, with my additional comment being that this recession marks a regime shift from decades of declining inflation to higher structural levels. This deserves a bigger de-rating than average.”

NEW YORK, NEW YORK - JUNE 16: People walk by the New York Stock Exchange (NYSE) on June 16, 2022 in New York City. Stocks fell sharply in morning trading as investors react to the Federal Reserve's largest rate hike since 1994.  (Photo by Spencer Platt/Getty Images)

NEW YORK, NEW YORK – JUNE 16: People walk by the New York Stock Exchange (NYSE) on June 16, 2022 in New York City. Stocks fell sharply in morning trading as investors react to the Federal Reserve’s largest rate hike since 1994. (Photo by Spencer Platt/Getty Images)

On the move

Gainers

  • Centene (CNC) shares gained after the healthcare company raised its full-year guidance ahead of its investor day. The company now sees adjusted earnings per share coming in between $5.55 and $5.70, up from a prior range of between $5.40 and $5.55.

  • Amazon (AMZN) shares rose Friday morning to shake off a 3.7% drop on Thursday amid a drawdown in Big Tech names. The company also announced its 2022 Prime Day sales event will take place on July 12 and 13 this year.

  • American Express (AXP) shares gained after Baird upgraded the Dow component as well as peer payment companies Capital One, M&T Bank and Fifth Third to Outperform from Neutral, according to Bloomberg. Baird noted that the “risk/reward finally [looks] attractive for bank and card names” in the wake of the latest selling pressures for the space.

Decliners

  • Adobe (ADBE) shares declined after the company slashed its full-year revenue outlook to account for greater tax and currency headwinds, and the impact of its decision to end sales in Russia and Belarus amid the war in Ukraine. The company now sees full-year sales totaling $17.7 billion compared to a prior outlook for $17.9 billion.

  • Advent Technology (ADN), a fuel cell and hydrogen technology developer, saw shares sink more than 10% in early trading. The move came a day after the stock skyrocketed by more than 200%, after the company announced it received a funding notification for about $821 million for a fuel cell development project in…



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