Brendan McDermid | Reuters
US stock futures fell on Friday morning after big drops in top tech names pushed top averages lower during regular trading.
Dow Jones Industrial Average futures fell 200 points. Futures also pointed to declines in the opening of the S&P 500 and Nasdaq 100.
Tensions between the United States and China worsened on Friday during Asian hours. China ordered the closure of a US consulate in Chengdu, retaliating after Washington closed the Chinese consulate in Houston earlier this week. China’s markets plunged into trading on Friday afternoon as a result of that development.
In Thursday’s session, the Dow ended more than 1% lower along with the S&P 500. The Nasdaq Composite fell more than 3% as Microsoft and Apple lost more than 4%. Facebook and Amazon fell 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 are up more than 47% to date. Alphabet and Facebook increased more than 13% in that time.
“Concerns about another technology bubble are increasing,” said Keith Lerner, chief market strategist at Truist / SunTrust Advisory, in a note. “There is also an increasing risk of concentration, and the top five stocks now represent 22% of the S&P 500 index.”
Lerner undoubtedly noted that “current conditions are not largely comparable to the mania observed during the tech bubble of the late 1990s.”
“Absolute valuations are high, but they are less than half the levels reached back then. The growing influence of a small group of stocks is a risk to the overall market, although these same companies are also contributing a larger amount. of cash flow and earnings, “he said.
Thursday’s losses came after the latest unemployment data raised concerns about the state of the economy.
The Labor Department said 1.4 million Americans applied for unemployment benefits for the week ending July 18, beating a Dow Jones estimate of 1.3 million claims. The report broke a streak of 15 consecutive weeks in which initial claims decreased.
This is “certainly sobering and a clear reminder that the pandemic is far from over affecting our economy,” said Mike Loewengart, managing director of investment strategy at E-Trade. “As we cling to hopes of a stimulus bill, Americans feel the pain of stalled reopens and renewed closings across the country.”
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