U.S. stock futures fell early Friday following broad declines in the major tech names that pushed the major averages lower during regular trading.
Dow Jones Industrial Average futures implied a loss of about 60 points at the open, off the worst levels of thee morning. Futures also pointed to declines at the open for the S&P 500 and Nasdaq 100.
Early action in Big Tech pointed to more losses, with Amazon, Apple and Microsoft each down more than 1% in premarket trading.
Tensions between the U.S. and China worsened Friday after China ordered the closure of a U.S. consulate in Chengdu, retaliating after Washington shut the Chinese consulate in Houston earlier this week. China markets plunged in response.
In Thursday’s U.S. session, the Dow ended down more than 1% along with the S&P 500. The Nasdaq Composite dropped more than 3% as Microsoft and Apple each lost more than 4%. Facebook and Amazon were both down more than 3% and Netflix lost 2.5%.
Big Tech has been the market leader this year as investors grapple with the coronavirus pandemic and its impact on corporate profits. Amazon and Netflix were both up more than 47% year to date. Alphabet and Facebook are up over 13% over that time.
“Concerns of another technology bubble are rising,” said Keith Lerner, chief market strategist at Truist/SunTrust Advisory, in a note. “There is also growing concentration risk, with the top five stocks now accounting for 22% of the S&P 500 Index.”
To be sure, Lerner noted that “conditions today are largely not comparable to the mania seen during the technology bubble of the late 90s.”
“Absolute valuations are elevated but are less than half of the levels reached back then. The rising influence of a small group of stocks is a risk for the overall market, though these same companies are also contributing an increasing amount of cash flow and profits,” he said.
Thursday’s losses come after the latest unemployment data raised concern about the state of the economy.
The Labor Department said 1.4 million Americans filed for unemployment benefits for the week ending July 18, topping a Dow Jones estimate of 1.3 million claims.
This is “no doubt sobering and a clear reminder that the pandemic is far from finished exacting its toll on our economy,” said Mike Loewengart, managing director of investment strategy at E-Trade. “While we’re hanging on to hopes of a stimulus bill, Americans are feeling the pain of stalled reopenings and renewed shutdowns across the country.”
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U.S. stock futures fell early Friday after broad declines in the major tech names pushed the major averages lower during regular trading.