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MARKET SNAPSHOT: U.S. Stock Futures Volatile As Dow Faces Worst Week Since The Global Financial Crisis

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02/09/2018 | 01:24pm CEST

By Barbara Kollmeyer, MarketWatch

Dow, S&P 500 in correction territory after Thursday's plunge

U.S. stock futures wobbled Friday in volatile trade as and investors remained uneasy at the end of a bruising week for stocks, one that could be the worst the Dow has seen since the height of the financial crisis in 2008.

A more-than-1,000 point drop for the Dow late Thursday was weighing on global markets Friday, with Chinese stocks bearing the brunt of the blow, dropping as much as 6% at one point.

The losses came on mounting fears that faster-than-expected inflation will lead to more Federal Reserve hikes this year than currently expected.

The shutdown of the federal government was yet another worry for investors, as lawmakers worked through the night to get a budget deal through after funding ran out Thursday midnight.

What are the main benchmarks doing?

Stock futures pared earlier gains or turned negative as the U.S. open drew closer. Dow Jones Industrial Average futures gave up a gain of over 100 points, to drop 5 points to 23,950, while S&P 500 futures added 4.1 points, or 0.2%, to 2,598. Nasdaq-100 futures gained 27.75 points, or 0.5%, to 6,345.75.

Stocks went into free fall late Thursday , with the Dow Jones Industrial Average plunging 1,032.89 points, or 4.2%, to close at 23,860.46 and log its second-worst point decline ever. The S&P 500 index skidded 100.66 points, or 3.8%, to finish at 2,581, while the Nasdaq Composite Index sank 274.82 points, or 3.9%, to end at 6,777.16.

The Dow and S&P 500 were left off 10.4% and 10.2%, respectively, from their all-time highs. That puts them both in correction territory, which is usually defined as a pullback of at least 10% from a recent peak.

The Cboe Volatility Index soared 24% to 34.48 on Thursday.

Don't miss:Jim Cramer blames a 'group of complete morons' for blowing up the market

What's driving markets?

Driven by volatility worries and inflation concerns, stocks are facing their worst weekly performances in years, with the Dow down 6.5% as of Thursday's close. A drop of that magnitude has not been seen since the week of Oct. 10, 2008, when the Dow plummeted 18.15% in the thick of the global financial crisis.

However, should stocks mount a recovery Friday, that weekly loss might come nearer to a 6.2% drop in the week ending Jan. 8, 2016, or a drop of 6.4% in the week ending Sept. 23, 2011.

The S&P 500 is down 6.6% for the week, as of Thursday's close. That would mark the biggest weekly drop since a 7.2% decline in the week ended August 5, 2011.

Futures action indicates investors may be tempted to pick up cheap stocks, though some may choose to stay on the sidelines ahead of the weekend. Warnings in the run-up to what has been a breathless climb for stocks have been fairly persistent.

Volatility seemed to ebb a tiny bit, with futures for the Cboe Volatility Index down 4.2% to 32.06, according to FactSet.

Investors will wake to a temporary government shutdown, triggered by a delay in the Senate's vote on a two-year budget deal stopgap spending bill. While the Senate and House have now both approved the deal, a signature from President Donald Trump will be required to lift the shutdown.

Trade data for December is the only major item on the economic docket. That report is due at 10 a.m. Eastern Time.

Check out:MarketWatch's Economic Calendar

What are strategists saying?

Konstantinos Anthis, researcher at ADS Securities, said markets could be looking to consolidate as a rough week comes to a close.

"Nevertheless, the sentiment is clearly negative, and with central banks poised to tighten their monetary policies on a global scale, yields are expected to continue moving higher and stocks to come under more pressure," Anthis said in a note to clients.

As for stock futures gains, Joel Kruger, currency strategist at LMAX Exchange, had this to say in emailed comments: "I wouldn't read much into it. I think there are larger forces at play here...namely the fact that policy normalizations are starting to move out of their infancy and the stock market is finally understanding the negative implication.

"Our indicators measuring market sentiment, which are partly based on price momentum in the markets, indicated that the market was very technically 'overbought' and thus prone to a correction. Following the equity market correction this week, our sentiment indicators have now returned to neutral. This suggests the market is more in balance now," said Allan von Mehren, chief analyst at Danske Bank, in a note to clients.

Check out: Fed's George says 3 rate hikes this year is 'reasonable baseline'


What stocks are active?

FireEye Inc. (>> FireEye Inc) shares surged 13% in premarket after the software-security company revealed its first quarterly profit .

Nvdia Corp.(>> NVIDIA Corporation) jumped 8% in premarket after upbeat earnings ().

Expedia Inc.(>> Expedia, Inc.) slid 16% after a wide earnings miss ().

What are other assets doing?

European stocks were headed for the worst week in two years , while Wall Street's late plunge hit Asia markets hard , with several indexes posting their worst week in years. The Shanghai Composite Index closed down 4%, after losing as much as 6% in the session, while the Nikkei 225 index dropped 2.3%.

After trading above 2.80% all of Thursday's session, the yield on 10-year Treasury notes remained elevated, at 2.843%.

Gold futures were modestly lower, while crude-oil futures fell over 1%, and the ICE U.S. Dollar Index was moving up.

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Stocks mentioned in the article : FireEye Inc, Expedia, Inc., NVIDIA Corporation
Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP -0.45% 3154.65 End-of-day quote.-4.81%
DJ INDUSTRIAL -0.30% 24811.76 Delayed Quote.1.19%
NASDAQ 100 -0.06% 6949.6986 Delayed Quote.7.35%
NASDAQ COMP. -0.02% 7424.4287 Delayed Quote.6.53%
NIKKEI 225 0.06% 22450.79 Real-time Quote.0.73%
S&P 500 -0.20% 2727.76 Real-time Quote.2.23%
US DOLLAR INDEX -0.26% 93.76 End-of-day quote.2.07%
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