Sunday, May 28

S&P Futures Lower After Wall Street Rout

The ongoing rout in growth stocks deepened in premarket trading Friday, as investors dumped shares of high-flying technology companies and sought shelter in companies that stand to benefit from elevated commodity prices.

Companies that were once pandemic darlings fell before the opening bell.

Peloton Interactive Inc. sank 1.4%, Zoom Video Communications Inc. fell 0.8%, Wayfair Inc. lost 0.4%. Mega-cap technology companies were also unspared, as investors edged out of shares of Google parent Alphabet Inc. Facebook parent Meta Platforms Inc. and Microsoft Corp., all of which fell at least 0.4%.

This year’s market volatility has forced investors to aggressively unwind pandemic-era bets as money managers contend with the impact of higher rates. When yields on bonds rise that diminishes the allure of stocks whose earnings are expected to come far into the future.

Many investors have rotated into companies that stand to benefit from this year’s boom in commodities. That dynamic was on display again Friday. Early premarket winners included Marathon Oil Corp. and steel manufacturer Nucor Corp., both of which climbed more than 1.5%.

A team of Deutsche Bank strategists led by Jim Reid, head of thematic research, attributed Thursday’s volatility to a growing realization among investors that the Federal Reserve will likely be unable to come to the market’s rescue, according to a Friday research note. During times of turmoil, some investors have to come to expect what’s known as the Fed put, or the Fed’s tendency to cut rates or hold off on rate increases in response to market turmoil.

“I can’t help but think that a great deal of the reaction yesterday was the appreciation that whilst the Fed can make soothing pronouncements, they are starting from an extraordinarily difficult starting point, and with limited flexibility to respond to market or economy concerns whilst they fight inflation,” the note said.

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