Here are the most important news, trends and analysis that investors need to start their trading day:
- Dow set to open lower after its worst day since 2020 on inflation worries
- Kohl's misses on earnings and cuts outlook, expects buyout offers soon
- Cisco shares sink as tech giant forecasts a surprising revenue decline
- Fed gets latest look at labor market, with jobless claims out before the bell
- Prices at the gas pump hit new highs, every state above $4 per gallon
Dow futures fell around 300 points Thursday after the 30-stock average posted its biggest daily loss since June 2020. It plunged 1,164 points, or nearly 3.6%, and sank deeper into a correction, well below the threshold for a decline of 10% or more from prior highs. The Nasdaq and the S&P 500 both plummeted more than 4% on Wednesday, with the latter closing on the brink of joining the former in bear market territory, defined as a decline of 20% or more from previous highs.
- Wednesday's sell-off accelerated throughout the session as Target's inflation-driven earnings miss confirmed the same story from Walmart a day earlier. Walmart and Target were modestly lower again in Thursday's premarket. They both tanked in their worst days since 1987 after their respective earnings reports Tuesday and Wednesday.
- Spirit Airlines' board on Thursday unanimously recommended that shareholders reject JetBlue's $30 per share tender offer. Spirit said a JetBlue transaction would have little chance of clearing regulatory hurdles. The ultra-discount carrier said it's moving ahead with its plan to merge with rival Frontier Airlines. Spirit fell 2% to under $19 per share in premarket trading, while JetBlue dropped less than 1% and Frontier fell more than 3%.
The retail wreck continued in Thursday's premarket as shares of Kohl's dropped nearly 8.5%, the morning after closing 11% lower. The department store chain before the bell posted a massive earnings miss for its fiscal first quarter and cut full-year profit and sales guidance. CEO Michelle Gass cited "macro headwinds related to lapping last year's stimulus and an inflationary consumer environment." Kohl's said Thursday that final and fully financed bids from potential buyers are expected in the coming weeks, as the retailer faces heightened pressure from activists to sell.
Pressuring stock futures Thursday morning, Dow stock Cisco Systems stumbled 11% in the premarket after the networking equipment and software maker missed on quarterly revenue and cut its full-year guidance. Cisco saw sales hit by Covid lockdowns in China as well as Russia's war in Ukraine. The company, after the closing bell Wednesday, did report better-than-expected earnings. Despite the big revenue miss and lower volumes, Cisco's pricing and spending strategies translated into stronger-than-anticipated margins.
As investors fled stocks, they sought the perceived safety of bonds, pushing the price on the 10-year Treasury higher and its yield lower Thursday. Bond prices and yields move inversely. The benchmark 10-year yield dipped under 3% after topping that level again a day earlier.
- The Federal Reserve before-the-bell got a look at the second pillar of its dual mandate of fostering price stability and maximum employment. Weekly initial jobless claims rose to 218,000, a bigger-than-expected increase. After hitting more than 50-year lows earlier this spring, first-time filings for unemployment benefits have gradually been creeping higher.
- The Philadelphia Fed's manufacturing index for May showed much lower-than-expected growth, hitting its lowest level in two years.
The markets have been sinking on concerns that the Fed-mandated economic slowdown via interest rates hikes and balance sheet runoffs won't be able to get inflation under control. One of the areas inflation is most evident is at the gas pump.
- The national average for a gallon of gasoline hit a new high of nearly $4.59, according to AAA. Every state is over $4 per gallon, with California topping $6.
- Yardeni Research projects households are spending the equivalent of $5,000 a year on gasoline, a 78% increase compared with a year ago. The reason behind the sharp rise in gas prices is elevated oil prices due to disruptions from Russia's war in Ukraine.