Brendan McDermid | Reuters
U.S. stock futures slipped early Friday morning after broad declines in the major tech names pushed the major averages lower during regular trading.
Dow Jones Industrial Average futures were down 106 points. Futures also pointed to declines at the open for the S&P 500 and Nasdaq 100 futures.
Tensions between the U.S. and China worsened on Friday during Asia hours. 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 dived in afternoon trade on Friday on the back of that development.
In Thursday’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% in 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. The report snapped a streak of 15 straight weeks in which initial claims declined.
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.”
Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.
