(Reuters) – U.S. stock index futures retreated on Friday, with the S&P 500 and the Nasdaq pulling back after consecutive record highs as investors weighed hawkish Federal Reserve projections against the backdrop of a cooling economy.
The S&P 500 and the Nasdaq notched record closing highs for the fourth consecutive session on Thursday, as technology shares rallied. The S&P 500 information technology sector also closed at a record high for the fourth straight time.
Data showed on Thursday producer prices unexpectedly fell in May, while another report said the number of Americans filing new claims for unemployment benefits increased last week to a 10-month high. That helped keep alive hopes for a forthcoming interest rate cut by the Fed.
However, the central bank on Wednesday dialed back its projections for three cuts this year to just one.
Markets, however, seemed undeterred so far – CME’s FedWatch tool shows an over 68% chance of a cut in September, while interest rate traders are pricing in about two cuts by year-end.
A rally in chip stocks, led by Broadcom, helped lift the semiconductor index to an all-time high on Thursday. The chipmaker rose 0.5% in premarket trading, while peers Nvidia and Micron were up 1.0% and 0.3%.
Futures tracking the small-cap Russell 2000 slipped 1.3%, while Dow futures were firmly in the red after the index closed lower on Thursday.
Megacaps Amazon and Microsoft slipped 0.4% and 0.5%, respectively, in trading before the bell.
While the S&P 500 and the Nasdaq are on pace for weekly gains for the second consecutive week, the Dow is on track to end the week slightly lower.
Hopes of easing Fed policy, combined with strength in Wall Street’s biggest stocks, have seen major indexes rally to record highs this year. However, this has raised some concerns about the sustainability of equity strength.
A BofA Global Research report also showed the appeal of megacap growth stocks, as U.S. value stock funds saw $2.6 billion of outflows, while investors poured $1.8 billion into U.S. growth stock funds in the week to Wednesday.
The Russell 1000 growth index is up nearly 20% so far this year, while the value index has only gained around 5%.
Investors will also eye comments from Chicago Fed President Austan Goolsbee and Fed Governor Lisa Cook later on Friday, as well as May import and export price data and the University of Michigan’s Consumer Sentiment survey for June.
At 5:35 a.m. ET, Dow e-minis were down 241 points, or 0.62%, S&P 500 e-minis were down 18 points, or 0.33%, and Nasdaq 100 e-minis were down 10 points, or 0.05%.
Among single movers, Adobe jumped 15.3% after the company raised its revenue forecast for fiscal 2024 on Thursday, expecting more demand for its artificial intelligence-powered software.
Sirius XM slipped 2.0% after the Nasdaq said the stock would be removed from the Nasdaq 100 index, and replaced with Arm Holdings. Shares of Arm rose 1.8%.
(Reporting by Lisa Mattackal in Bengaluru; Editing by Maju Samuel)
