Stock futures opened slightly higher Thursday evening after a rout in technology stocks earlier during the regular trading day, as investors turned away from growth stocks in anticipation of tighter monetary policy next year.
Contracts on the S&P 500 ticked up. Earlier, the index closed lower, with the tech-heavy information technology and consumer discretionary sectors leading the way lower. The Nasdaq underperformed to drop 2.5% to give back all gain after a rally on Wednesday. The Dow ended just slightly in the red.
Shares of FedEx (FDX) jumped in late trading after the shipping giant raised its full-year earnings forecast, delivered better-than-expected fiscal second-quarter results and authorized a new $5 billion stock buyback program. Rivian (RIVN), meanwhile, saw shares sink during the after-hours session following its first quarterly report since its IPO last month. The electric-vehicle maker said in its shareholder letter it expected to be “a few hundred vehicles short” of its prior target of producing 1,200 units by the end of this year.
Investors’ main focus this week has remained fixed on the Federal Reserve’s updated outlook on monetary policy for next year, with the central bank’s projections delivered mid-week suggesting the Fed could hike interest rates three times next year.
The specter of higher rates – and a lower-liquidity environment as the central bank also speeds up the tapering process of its asset purchases — has continued to weigh heavily on longer-duration technology and growth stocks valued heavily on future earnings potential. Even with Wednesday’s bounce, the Nasdaq Composite was off 5% over the past month. And shares of some notable technology stocks sank deeply on Thursday, with Apple (AAPL) shares dropping by nearly 4%, and Adobe’s (ADBE) stock sliding by more than 10%, after the software giant delivered a full-year sales forecast that suggested slowing growth for its services during the reopening.
On the other hand, cyclical stocks in the energy and financials sectors outperformed on Thursday, with the prospects of higher interest rates and stronger growth seen as benefitting these sectors.
“The thing investors have to understand is, we’re going through a major transition in monetary policy,” Troy Gayeski, FS Investments chief market strategist, told Yahoo Finance Live on Thursday. “The Fed has been running emergency policies arguably far longer than they should have been, and as that money supply growth slows down as they ease off the balance sheet expansion and ultimately hike next year, one would at least expect more volatility in markets. And that’s really what we’ve been seeing the last month.”
“The biggest difference between now and six months ago, or even more a year ago, is you could pretty much go long anything and you were confident it was going to go up. The economy was booming, we had a lot of fiscal stimulus, we still had unprecedented monetary policy stimulus,” he added. “And it’s a very different environment in 2022 where you’re going to have to pick and choose much more carefully.”
6:01 p.m. ET Thursday: Stock futures steady after tech sell-off
Here were the main moves in markets as the overnight session kicked off on Thursday:
S&P 500 futures (ES=F): +5.25 points (+0.11%), to 4,674.00
Dow futures (YM=F): +52 points (+0.14%), to 35,954.00
Nasdaq futures (NQ=F): +6 points (+0.04%) to 15,876.50
