U.S. stock futures experienced a decline on Friday, following a significant selloff in the previous session. Concerns over the Federal Reserve’s interest rate policies and a continued shift away from technology stocks contributed to this negative sentiment.
At 05:30 ET, the Dow Jones Industrial Average fell by 60 points, or 0.1%, the S&P 500 slipped 12 points, or 0.2%, and the Nasdaq Composite dropped 100 points, or 0.4%. The main stock indices had suffered their worst day in over a month on Thursday, primarily due to a cooling optimism that arose after the recent resolution of the U.S. government shutdown. Market players are now grappling with worries about the sustainability of high valuations in the tech sector, particularly in light of the Federal Reserve’s likely decision to maintain its stance on interest rates.
On Thursday, the Dow Jones fell nearly 800 points, or 1.7%, retreating below the 48,000 level it had crossed for the first time earlier in the week. Both the S&P 500 and Nasdaq experienced similar declines, losing 1.7% and 2.3%, respectively, with the latter on track to end a seven-week winning streak.
The anticipated rate cut by the Federal Reserve in December is now being cast into doubt. Hawkish statements from several Fed officials have led to decreased investor expectations regarding a rate cut. Minneapolis Fed President Neel Kashkari recently conveyed his opposition to a rate adjustment last month and expressed uncertainty about the December meeting. Other officials, like St. Louis Fed President Alberto Musalem and Cleveland Fed President Beth Hammack, have voiced concerns over the risks of overly accommodating policies amid persistently elevated inflation.
Currently, markets are estimating the likelihood of a 25 basis point rate cut in December at approximately 50%, a significant drop from the 67.8% chance previously indicated. Investor attention is increasingly focused on the ramifications of the recent 43-day government shutdown.
In labor market news, applications for U.S. jobless benefits saw a slight decline last week, as reported through state-level filings. First-time claims for state unemployment benefits fell to a seasonally-adjusted 227,543 for the week ending November 8, compared to 228,899 the prior week. This figure aligns closely with estimates from major analysts, though the decrease wasn’t substantial enough to strengthen the argument for a December rate cut.
Technology stocks continue to struggle, currently facing the largest drag on Wall Street. Amid growing skepticism regarding the stability of AI-driven valuations, shares of Applied Materials fell in premarket trading after the company indicated that chipmaking equipment spending in China is set to decline next year due to intensified U.S. export controls. The company anticipates a $600 million revenue hit for fiscal 2026 as a result of these expanded restrictions. However, Applied Materials has also projected that increased business expenditures on AI could boost sales in the latter half of next year.
Anticipation is building ahead of Nvidia’s quarterly earnings report, which is scheduled for November 19. Analysts note that this report will be pivotal in assessing whether the enthusiasm and heavy investments surrounding AI and semiconductor technology continue to thrive amid shifting market conditions.
In the energy sector, oil prices surged following a Ukrainian drone strike on an oil depot in Russia’s Black Sea port of Novorossiysk, raising fears about global supply disruptions. Brent crude futures increased by 2.4%, reaching $64.49 a barrel, while U.S. West Texas Intermediate crude futures rose by 2.7% to $60.25 a barrel. Despite these price gains, both benchmark contracts are projected to close the week with only minor increases, following a prior selloff triggered by the Organization of the Petroleum Exporting Countries indicating that global oil supply is expected to exceed demand slightly by 2026.
