On Thursday, US stocks retreated, giving up gains from earlier in the week as investors began to doubt the Federal Reserve’s plans for interest-rate hikes. Futures for the Dow Jones Industrial Average (^DJI) dropped 0.2%, while S&P 500 (^GSPC) futures slipped 0.2%, and Nasdaq 100 (^NDX) futures fell over 0.3%.
The recent rally in stocks had been fueled by the belief that cooling inflation would prompt the Federal Reserve to ease back on tightening. However, some on Wall Street are now questioning whether the market’s expectations of a shift in Fed policy are too optimistic, especially in light of strong retail data and earnings reports from major retailers like Walmart and Macy’s.
Walmart reported quarterly earnings that exceeded estimates and raised its annual outlook, although not by as much as expected, leading to a more than 7% drop in its shares during pre-market trading. On the other hand, Macy’s stock jumped 10% after the department store’s profit beat expectations.
The market is also keeping a close eye on President Joe Biden’s recent meeting with China’s Xi Jinping, which was described as “high-stakes.” While Biden welcomed progress in rebuilding ties between the US and China, he also referred to Xi as a “dictator.” This meeting and the continuing economic differences between the two superpowers have been factors in the market’s movements.
In addition to corporate earnings and geopolitical developments, investors are awaiting the weekly update on US jobless claims for any surprises on the economic front.
Overall, the news of potential interest-rate hikes and upcoming economic data has left the market in a state of uncertainty, leading to the retracement in stock futures on Thursday.