Tech Futures Rally after a Brutal Week of Trading

U.S. equity futures rose, suggesting markets could stage a relief rally at the end of a trying week of major index losses.

Futures tied to the S&P 500 rose 1.2% on Friday, while those for the Dow Jones Industrial Average added 0.7%. Contracts for the tech-heavy Nasdaq-100 jumped 1.7%.

Twitter TWTR -2.19%

shares fell 14% before market after Tesla Chief Executive Elon Musk tweeted that his deal to buy the social media company was “temporarily on hold pending details supporting the calculation that spam/fake accounts represent less than 5% of users”. Last month, Mr. Musk struck a $44 billion deal to make Twitter private.

The upside moves in the US market followed a late-session rally on Thursday that helped the Nasdaq Composite to a gain. Risk sentiment rippled through international equity markets overnight. On Friday morning in the United States, investors scooped up shares of battered tech companies ahead of the opening bell

Investors described the rebound as a reprieve from a market sell-off that put the three major U.S. indexes on pace for their worst week since late January. As of Thursday’s close, the Nasdaq Composite was down 6.4% this week. The Dow Jones, meanwhile, is poised to fall 3.6% and extend its losses for a seventh consecutive week – its longest losing streak since 2001.

“It could just be a buy-the-dip rally and a dead cat bounce than anything else,” said Greg Swenson, founding partner of Brigg Macadam, a London-based investment bank. Looking ahead, he said, he predicts further losses for the US stock market. “Even big companies will suffer with the market.”

Investors are currently facing problems not seen in decades as inflation continues to hover near a four-decade high. Many traders are now counting on the growing risk of a recession as the Federal Reserve tries to rein in price pressures. Many institutional and individual investors have begun to discount the idea that the Fed could stage a so-called soft landing, in which inflation falls but unemployment stays low and the economy continues to grow.

On Thursday, Fed Chairman Jerome Powell acknowledged that getting inflation under control could have a short-term impact on the economy, telling the Marketplace radio show that “the process of bringing inflation down at 2% will also lead to difficulties”.

He repeated his view that further increases of half a percentage point would likely be appropriate in future meetings, but said the central bank could consider larger increases if economic data dictates.

This week’s inflation report provided little reassurance to investors, especially after data showed that price pressures were broad-based. Even as gasoline prices fell, prices for groceries as well as restaurants, air travel and other services rose, spooking investors who had hoped inflation had peaked.

This has forced many to sell riskier investments and pile into assets perceived to be safer. Growth and technology stocks, which are generally penalized by higher interest rates, were particularly penalized. But the risk sentiment spilled over elsewhere, leading to sharp drops in cryptocurrencies as well.

“This week has been like a pivot in the markets. The mood has changed from assessing whether we can live in an economy with higher rates to [investors] asking, “Are we on the verge of a recession? said Florian Ielpo, Head of Macro at Lombard Odier Investment Managers.

On Friday, however, tech stocks were among those that led the pre-market rebound. Tesla jumped 6.9%, Nvidia added 3.6% and Netflix gained 2.4%.

Robinhood jumped 24% pre-market after Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, revealed he had bought a 7.6% stake in the brokerage. Duolingo jumped 18% before the opening bell after the language-learning platform reported a surge in revenue and monthly active users.

Bitcoin climbed 6.7% to $30,492.75 on Friday, from its 5 p.m. ET level of $28,572.24 on Thursday. Yet elsewhere in the cryptocurrency markets, beleaguered stablecoin TerraUSD continued to spiral lower, trading at 11 cents as of 4 a.m. ET. A so-called stablecoin for its typical $1 peg, TerraUSD broke that level last weekend after a wave of selling in the token. Its sister token Luna also fell precipitously this week, trading at half a penny at 4 a.m. from over $60 on Monday.

Traders worked on the floor of the New York Stock Exchange on Thursday.


Photo:

John Minchillo/Associated Press

In the bond market, the yield on the benchmark 10-year U.S. Treasury rose to 2.911% from 2.815% on Thursday, reversing a four-day drop in yield that came as investors retreated into bonds. Yields rise when bond prices fall.

The WSJ Dollar Index, which measures the greenback against a basket of other currencies, held steady, coming to a halt after its six-day winning streak.

Overseas stock markets also traded higher on Friday. In Europe, the pan-continental Stoxx Europe 600 index climbed 1.4%. In Asia, Hong Kong’s Hang Seng gained 2.7%, while Japan’s Nikkei 225 jumped 2.6%. The Shanghai Composite gained 1%.

—Caitlin Ostroff contributed to this article.

Write to Caitlin McCabe at [email protected]

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