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Stock futures fall after Wednesday’s rout, S&P 500 approaches bear market

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Yahoo Finance Live anchors discuss stock futures after Wednesday’s steep decline.

Video transcript

JULIE HYMAN: And we got to start with the markets. Those of you hoping for a reprieve this morning, we're not getting it, at least not yet. If you take a look at the Dow futures this morning, Brad, we're still looking at a decline of about 350 points. S&P futures here down 42, about a percent drop. And NASDAQ 100 futures are down about a percent.

And I've been watching the 10-year yield quite closely, as well as the dollar. 10-year yield actually pulling back. And that's because even though the Federal Reserve is raising rates, as we know, there's a lot of concern about growth. So that's depressing yields.

But finally, just quickly want to also look at what we saw yesterday. And yesterday saw some $1 and 1/2 trillion wiped off the value of US averages. The Dow down 3 and 1/2%, the S&P down 4%, the NASDAQ down 4.7%, which was the worst performance for the major averages, going back to June of 2020.

BRAD SMITH: And remarkable here, if you dive in even further to the sector activity that we saw, we often looked at staples to see how they're performing relative to some of the other sectors to see where there might be strength. Of course, we know how energy has been one of the top performers. There was not a safe spot to be found in major sectors yesterday. Here, you're seeing the 11 S&P 500 sectors. And particularly here, you saw the biggest declines in consumer discretionary and consumer staples as well. Both of those down more than 6%.

You also dive in on XLK as well. And taking a look here, this is the pre-market moves that you're going to see on that bottom line. But particularly here, as you're taking a look at XLK, you saw that move lower by about 4 and 1/2%, 4.6%. That is those tech stocks that have continued to be battered, especially in this rising interest rate and rising rates environment as well.

JULIE HYMAN: Yeah, and Sozz, we want to get your take, but real quickly, before we dive into that, just want to get a quick look at our trending tickers this morning and what we are seeing here in pre-market as well. Cisco Systems catching my eye, of course. That stock is down about 10% after its earnings after the bell yesterday and a lot of talk about supply chain shutdowns in China hurting that company's business. And so we're going to be watching that, in addition to a lot of other stuff today, Sozz.

BRIAN SOZZI: Yeah, I know. Hey, guys. I know I'm smiling here, but it's really not how I'm feeling on the inside after spending, really, the past 12 hours talking to a lot of folks on Wall Street. These calls are absolutely depressing. But I came up with a graphic here really listing what I'm hearing from folks on the Street on the trigger points for that route we saw in markets yesterday and why are you still seeing that pressure continue into today's session.

A couple of things. First and foremost, that was bad earnings reports from Walmart and Target, has a lot of folks worried about whether that is the start of a major consumer spending slowdown starting this summer. You're now seeing profit estimates for the entire retail complex being taken down a lot. And that is pressuring these stocks. Next up, Wall Street hates it when markets close below large round numbers on high volume. Of course, now you have the S&P 500 below 4,000.

Next up, no signs of peak inflation, and that could equal a tougher Federal Reserve. The vibe coming off these earnings calls this week from a Walmart and Target is that inflation continues to accelerate, which may only put now more pressure on the Federal Reserve to jack up rates even quicker to try to get inflation under control because the view is, they have lost control.

Last but not least, you could see more forced selling here by hedge funds. Of course, we were talking about that Melvin Capital news in our morning meeting. But the bottom line is hedge funds have been [INAUDIBLE] up on tech stocks, and that trade has gone completely south.

JULIE HYMAN: Yeah, definitely. There's a lot to choose from. I mean, at the same time-- and I know we're going to talk more about calls in just a moment, but the S&P 500, maybe a little glimmer of green, is trading at 16 and 1/2 times forward earnings. That's the lowest since April of 2020. So we are seeing some folks maybe starting to nibble here.

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