Wall Street futures fall as markets turn to cautious Fed

(Reuters) – U.S. stock index futures fell on Friday, with the S&P 500 and Nasdaq falling after back-to-back record highs, as investors weighed hawkish Federal Reserve projections amid a slowing economy.

The S&P 500 and Nasdaq hit record closing highs for the fourth straight session on Thursday as technology stocks rallied. The S&P 500 information technology sector also closed at a record high for the fourth consecutive time.

Data showed Thursday that producer prices fell unexpectedly in May, while another report said the number of Americans filing new claims for unemployment benefits rose last week to its highest high level for 10 months. This helped to maintain hopes of an upcoming interest rate cut by the Fed.

However, the central bank on Wednesday reduced its forecast of three cuts this year to just one.

Markets, however, appear undeterred so far: CME’s FedWatch tool indicates a more than 68% chance of a September cut, while interest rate traders are pricing in around two reductions by the end of the year.

A rally in chip stocks, led by Broadcom, helped lift the semiconductor index to a record high on Thursday. The chipmaker rose 0.5% in premarket trading, while peers Nvidia and Micron rose 1.0% and 0.3%.

Futures tracking the small-cap Russell 2000 index slipped 1.3%, while Dow futures were firmly in the red after the index closed lower on Thursday.

Megacaps Amazon and Microsoft slipped 0.4% and 0.5%, respectively, in trading before the bell.

While the S&P 500 and Nasdaq are on track to post weekly gains for the second week in a row, the Dow is on track to finish the week slightly lower.

Hopes for Fed policy easing, combined with strength in Wall Street’s biggest stocks, have seen major indexes hit record highs this year. However, this has raised some concerns about the sustainability of equity strength.

A report from BofA Global Research also showed the appeal of mega-cap growth stocks, with US value stock funds seeing $2.6 billion in outflows, while investors poured in $1.8 billion in U.S. growth stock funds during the week leading up to Wednesday.

The Russell 1000 growth index is up nearly 20% year to date, while the value index has only gained about 5%.

Investors will also be watching for comments from Chicago Fed President Austan Goolsbee and Fed Governor Lisa Cook later Friday, as well as import and export price data for May and the June University of Michigan Consumer Sentiment Survey.

As of 5:35 a.m. ET, the Dow e-minis were down 241 points, or 0.62%, the S&P 500 e-minis were down 18 points, or 0.33%, and the e-minis of the Nasdaq 100 were down 10 points, or 0.05%.

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Among single companies, Adobe jumped 15.3% after the company raised its revenue forecast for fiscal 2024 on Thursday, expecting increased demand for its artificial intelligence-based software.

Sirius XM slipped 2.0% after Nasdaq announced the stock would be removed from the Nasdaq 100 index and replaced by Arm Holdings. Arm shares rose 1.8%.

(Reporting by Lisa Mattackal in Bangalore; editing by Maju…

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