Dow Jones, S&P 500, Nasdaq set to open flat to higher as markets take a breather

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6.30am: Recessionary rumbles haven’t gone away

Wall Street is expected to open flat to modestly higher, ending two days of heavy loss following mixed economic data and even more mixed corporate earnings that have added to market uncertainty. 

Futures for the Dow Jones Industrial Average fell less than 0.1% in Friday pre-market trading, while those for the broader S&P 500 index rose 0.1% and contracts for the Nasdaq-100 gained 0.4%.

Markets declined again on Thursday as traders shrugged off a decline in initial jobless claims to their lowest level since September, focusing instead on disappointing housing market data that added to the worries that the US economy has tipped into recession. 

At the close the Dow Jones was down 0.8% to 33,045, the S&P 500 was also 0.8% lower at 3,899, and the Nasdaq Composite fell 1% to 10,852.

Netflix fell 3% before surging more than 7% in Friday pre-market trading after the streaming giant announced subscription growth that topped expectations and said co-CEO Reed Hastings was stepping down. Proctor & Gamble lost 2% after it reported a 6% decline in sales volumes for the December quarter. 

“A generally tepid start to the quarterly reporting season has added to investor concerns, with earnings being subject to some downgrades, particularly in the months to come,” commented Richard Hunter, head of markets at interactive investor. “The major concern is that earnings valuations have not yet been adjusted to reflect the impact of a possible recession, which would be highly negative for equities on any number of fronts.”

Hunter noted that the ongoing fight against inflation at the risk of central bank overtightening remains centre stage.

“Recent comments from certain Federal Reserve members seem to accept that progress is being made in taming inflation, while at the same time reiterating that a terminal rate of around 5% and higher rates for longer seem the most likely outcome,” he added. “The recessionary rumbles which have loudened over recent days have also resulted in a blow to what was a promising start to the year.”