U.S. stock-index futures pointed to a lower open on Friday, tracking a global equity retreat fueled by the mounting currency crisis in Turkey, which raised the alarm for possible contagion into other markets.
What are early indications showing?
Futures on the Dow Jones Industrial Average YMU8, -0.38% fell 93 points or 0.4%, while futures on the S&P 500 ESU8, -0.44% shed over 11 points, or 0.4%, and futures on the Nasdaq-100 NQU8, -0.53% gave up 34 points, or 0.5%.
U.S. stocks closed mostly lower Thursday as weak energy and industrial shares weighed on the market, but the Nasdaq bucked the trend to end slightly higher. That marked its eighth straight session, its longest winning streak since October.
On Thursday, the Dow industrials DJIA, -0.29% fell 74.52 points, 0.3%, to 25,509.23, while the S&P 500 SPX, -0.14% shed 4.12 points, or 0.1%, to 2,853.58. The Nasdaq Composite Index COMP, +0.04% edged up 3.46 points to 7,891.78.
For the week, the Dow and S&P 500 have narrow weekly gains under threat, while the Nasdaq is on track for a weekly return nearing 1%.
What’s driving the market?
The steep decline in the Turkish lira comes after the European Central Bank expressed concern about the country, where President Recep Tayyip Erdogan was re-elected in a snap vote in June and whose growing power has raised questions about the independence of the country’s central bank.
The iShares MSCI Turkey ETF TUR, -3.87% plummeted 6.2% in the U.S. premarket. It has already plunged more than 42% thus far this year.
While U.S. companies have limited direct exposure to the country, the lira’s decline was the latest sign of turmoil in international economies, particularly emerging markets. As such, it added to the cautious tone in the equity market, particularly as both the S&P and the Nasdaq are within 1% of record levels.
Russia’s market volatility added to the global theme. Newly announced U.S. sanctions—and the potential for a second round of actions in 90 days—roiled Russia’s currency and blue-chip stocks as the country braced for further economic pain amid uncertainties over the Trump administration’s commitment to enforcement.
In Moscow, the ruble USDRUB, +0.7465% shed as much as 5% against the dollar on Thursday and stock averages there plunged as much as 9%.
U.S. stock trading in recent sessions has mostly been a tug of war between concerns about the continuing trade dispute between the U.S. and China and positive sentiment over strong corporate earnings against a healthy economic backdrop. U.S. earnings, on the whole, are solid, with the number of companies beating earnings estimates at the highest point since the third quarter of 2009, according to JPMorgan Chase.
What data are in focus?
Consumer price indexes for July are due for release at 8:30 a.m. Eastern time, while a snapshot of the federal budget hits at 2 p.m.
What are market participants saying?
“These increased tensions [in Turkey and Russia] have … added up to a stronger dollar, something exacerbated this morning as reports of the ECB being concerned by the exposure of eurozone banks to Turkish debt (which is largely denominated in U.S. dollars),” said Richard Perry, strategist at Hantec Markets. “With major bond yields falling across the board, the euro has now broken down below a key floor around $1.1500 against the U.S. dollar. Equities are coming under corrective pressure too amidst the safe haven flow.”
Which stocks are in focus?
Overstock.com Inc. OSTK, +4.47% surged 15% in premarket trading a day after news about a private-equity investment overshadowed a larger-than-expected quarterly loss for the online retailer.
Dropbox Inc. DBX, +9.13% lost 5% before the bell. The retreat comes after a second-quarter earnings report, which also included news that Chief Operating Officer Dennis Woodside was stepping down and a post-IPO lockup on shares would expire earlier than previously planned.
Tronc Inc. TR, +0.34% shares slipped in the extended session Thursday following a run-up fueled by reports of a possible buyout after the media company reported quarterly results.
How are other markets performing?
The Turkish lira USDTRY, +9.7535% has been consistently hovering around an all-time low against the U.S. dollar this summer. It fell about 5.3% against the greenback, paring more severe losses overnight. One dollar recently bought 5.8595 Turkish lira, compared with 5.5426 late Thursday in New York, according to Dow Jones Market Data.
According to FactSet data, the lira is down 13.3% this week, bringing its year-to-date decline to more than 35%.
The ICE U.S. Dollar Index DXY, +0.44% was up 0.4%, off earlier sharper gains.
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