U.S. stock index futures edged lower Thursday morning, taking a breather after the recent rally and ahead of a flood of economic data and corporate earnings results.
The major averages are coming off a solid rally in the previous session, with the S&P 500 and Nasdaq Composite closing at two-month highs. However, futures tied to the S&P 500 and Dow Jones Industrial Average wavered between small gains and losses early Thursday.
Investors remain cautiously optimistic about the outlook for stocks into year-end, shaking off recent warnings from major retailers about consumer spending. Traders are looking ahead to October retail sales data and a reads on manufacturing and housing data due later in the morning.
Earnings Roll In
The retail sector remained in focus early Thursday, with quarterly results from Walmart and Macy’s moving the stocks in opposite directions.
Walmart shares dropped over 6% even after the retail giant topped estimates for third quarter earnings and revenue. Walmart noted higher-income shoppers were pulling back on discretionary purchases amid decades-high inflation.
Meanwhile, Macy’s stock jumped 9% after the department store chain swung to a profit in the third quarter, cut debt and raised its earnings outlook. Macy’s said it would remain disciplined on inventory levels during the holiday season.
Cisco Systems tumbled 11% in off-hours trading after the network gear maker predicted a revenue decline for the current quarter, heightening fears of a slowdown for tech spending. However, cybersecurity firm Palo Alto Networks bucked the trend, gaining 4% on an earnings beat and strong guidance.
China Tech Pressured
U.S.-listed shares of Chinese tech giants Alibaba and JD.com fell sharply before the bell, pressured after Reuters reported China was working on new regulations surrounding the livestreaming industry.
Alibaba separately announced it would not proceed with a highly-anticipated initial public offering for its Ant Group affiliate, marking the end of a two-year process to list the fintech arm.
Energy Leads Sectors
Among S&P 500 sectors, energy stocks have been leading the recent rebound, gaining over 10% in November so far as easing China COVID curbs raise optimism over global demand.
Meanwhile, the upside seen in rate-sensitive tech stocks indicates some bets for an eventual economic soft landing where the Fed can pull back on its aggressive monetary tightening.
Market participants are awaiting speeches from several Fed officials later Thursday for further clues about the path of policy. Comments from policymakers have largely struck a hawkish stance this week, even as October’s cooler-than-expected inflation data prompted speculation over a potential Fed “pivot.”
Economic Calendar Busy
On the economic data front, the October retail sales report at 8:30 AM ET will provide more evidence around how consumers are reacting to high inflation.
Sales are expected to have risen 1% last month after holding flat in September. Core retail sales, which exclude autos and gas, are forecast to climb 0.5%.
Investors will also take in the latest weekly jobless claims, October industrial production, and November reads on manufacturing in the Philadelphia and New York regions.
Housing starts and building permits for October will round out the morning data releases at 8:30 AM ET. Starts are projected to edge up 0.1% after a sharp 8.1% drop in September.
Euro Slides Below Parity
In currencies, the euro slid back below parity against the U.S. dollar, dropping under the 1.00 level as economic worries in the euro zone deepen.
The European Central Bank must choose between raising rates to fight record inflation or intervene to contain bond market stress. The prospect of more ECB tightening has amplified recession worries.
Oil Edges Lower
Oil prices ticked lower early Thursday but held most of the steep gains from the previous session. Hopes for easing COVID restrictions in China and bets the Fed will slow its pace of rate hikes have boosted the demand outlook.
U.S. West Texas Intermediate crude futures fell 0.3% to $85.20 a barrel. Brent crude, the international standard, declined 0.2% to $92.45 a barrel.
Gold was little changed at $1,770 an ounce. Treasury yields were mixed, with the 10-year Treasury holding around 3.79%.
In cryptocurrencies, Bitcoin climbed back above the $17,000 level after plunging below $16,000 earlier this week when crypto exchange Binance pulled out of a deal to buy rival FTX.
Summary
U.S. stock futures consolidated gains Thursday ahead of key economic data and earnings that could provide more clues about the health of consumers and businesses.
Retail stocks were in focus following results from Walmart and Macy’s. Tech stocks face pressure after Cisco’s weak outlook, while Alibaba and JD.com fell on China regulation concerns.
Investors also have a full slate of housing and manufacturing data, jobless claims and retail sales to parse through during Thursday’s session.
The recent rally indicates some optimism that inflation is cooling and corporate profits will hold up, but markets remain sensitive to recession risks as the Fed keeps rates elevated. Central bank speakers and economic data will be closely watched for any shifts in the policy or economic outlook.