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U.S. stock index futures were flat during overnight trading Sunday after the Nasdaq Composite Index posted its worst month since 2008, pressured by rising rates, rampant inflation, and underwhelming earnings from some of the largest technology companies.
Futures contracts tied to the Dow Jones Industrial Average slid 11 points. S&P 500 futures were flat, while Nasdaq 100 futures declined 0.2%.
The major averages sank on Friday, accelerating April’s losses. The Dow sank 939 points during the session, bringing its loss last week to roughly 2.5%. It was the 30-stock benchmark’s fifth-straight negative week.
The S&P 500 declined 3.63% on Friday, its worst day since June 2020, and posted its fourth-straight negative week for the first time since September 2020. The Nasdaq also posted a fourth-straight week of losses, after falling 4.2% on Friday. Both indexes registered their lowest closing levels of the year.
“This has become a classic trader’s market as spikes in volatility and increasingly bearish headlines reverberate,” said Quincy Krosby, chief equity strategist for LPL Financial.
The Dow and S&P 500 are coming off their worst month since March 2020, when the pandemic took hold. The Dow finished April 4.9% lower, while the S&P tanked 8.8%.
The selling was even more extreme in the tech-heavy Nasdaq Composite, which plunged 13.26% in April, its worst month since October 2008. The steep decline follows underperformance from large tech companies, including Amazon, Netflix and Meta Platforms.
“[D]isappointing guidance from technology giants Amazon and Apple have exacerbated concern that a decidedly more hawkish Fed, coupled with still intractable supply chain issues, and rising energy prices may make the hope of a ‘soft landing’ from the Fed more elusive,” Krosby said.
Netflix is down 49% over the last month, with Amazon and Meta losing 24% and 10.8%, respectively. Tech stocks have been hit especially hard since their often-elevated valuations and promise of future growth begin to look less attractive in a rising-rate environment.
Investors are looking ahead to Wednesday, when the Federal Open Market Committee will issue a statement on monetary policy. The decision will be released at 2 p.m. ET, with Federal Reserve Chairman Jerome Powell holding a press conference at 2:30 p.m.
“Rising cost pressures and uncertain outlooks from the largest technology names have investors agitated…and investors are not likely to be comfortable any time soon with the Fed widely expected to deliver a 50 basis point hike along with a hawkish message next week,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.
Another key economic indicator will come Friday when April’s jobs report is released.
Earnings season is now more than halfway finished, but a number of companies are set to post results in the coming week, including a host of consumer-focused restaurant and travel companies.
Expedia, MGM Resorts, Pfizer, Airbnb, Starbucks, Lyft, Marriott, Yum Brands, Uber eBay and TripAdvisor are just some of the names on deck.
Of the 275 S&P 500 companies that have reported earnings so far, 80% have beat earnings estimates with 73% topping revenue expectations, according to data from Refinitiv.