U.S. stock futures pointed to a sharply lower open on Friday, as a surge in oil prices and a jump in Treasury yields rattled investor confidence. Nasdaq 100 futures led the decline, falling 1.56%, while S&P 500 futures dropped 1.07% and Dow futures shed 330 points, or 0.66%, as of 5:38 a.m. ET.
The selloff hit growth stocks particularly hard, with the tech-heavy Nasdaq bearing the brunt. The 10-year Treasury yield climbed to 4.54%, its highest level in weeks, while Brent crude rose 3.3% to $109.19 a barrel. West Texas Intermediate crude gained 3.7% to $104.89, following President Donald Trump's warning that his patience with Iran was wearing thin. The comments raised fears of a potential escalation in the Middle East, threatening oil supplies through the Strait of Hormuz.
Oil Shock and Geopolitical Tensions
The oil rally was the dominant macro shock of the day. Brent crude's surge to $109.19 came after Trump's remarks, which analysts said heightened the risk of renewed military escalation. Vandana Hari of Vanda Insights noted that the situation carries a "tail risk of renewed military escalation." Kpler reported that only 10 ships transited the Strait of Hormuz in the last 24 hours, well below normal traffic levels.
A Beijing summit between Trump and Chinese President Xi Jinping failed to produce a clear breakthrough. While both leaders agreed that Tehran should not obtain nuclear weapons and expressed a desire to restore normal shipping through the Strait of Hormuz, no formal accords were published, leaving uncertainty about China's willingness to pressure Iran.
Retail Sales and Fed Expectations
Economic data added to the market's woes. April retail sales rose 0.5%, matching analysts' forecasts, while core retail sales also increased 0.5%. Import prices jumped 1.9%, the steepest monthly gain since March 2022, reflecting rising costs. The solid spending data dampened hopes for a Federal Reserve rate cut, as consumers continued to spend despite higher prices.
Sal Guatieri, senior economist at BMO Capital Markets, noted that while upper-tier consumers are still spending, lower-income households remain squeezed by rising fuel, food, and transport costs. On Polymarket's Fed contract, the odds of a rate hike in 2026 climbed to 37%, while the probability of no rate cuts this year stood at 72%.
Bond Market Pressures
The bond market has become a central worry for equities. With Kevin Warsh stepping in as Fed Chair, investors are watching yields climb on the back of oil-driven inflation. Byron Anderson of Laffer Tengler Investments summed up the dynamic: "Whatever oil does is where yields are going." Higher yields make borrowing more expensive and bonds more attractive relative to stocks, squeezing equity valuations.
Stock Movers
In premarket trading, Applied Materials (AMAT) slipped despite issuing bullish guidance. The company forecast third-quarter revenue of around $8.95 billion, well above the $8.09 billion analysts had expected, and adjusted earnings of $3.36 per share, topping estimates. CEO Gary Dickerson cited an "exceptionally strong foundation" driven by surging demand from TSMC and Samsung for AI production capacity.
Dexcom (DXCM) shares climbed roughly 6% in after-hours trading Thursday after the medical-device maker agreed to add two independent directors and make changes to a board committee as part of a deal with Elliott Investment Management. CEO Jake Leach pointed to the need for additional medtech and operations expertise on the board.
Airlines also felt the squeeze, with Delta Air Lines (DAL), United Airlines (UAL), and Southwest Airlines (LUV) sliding in premarket trading as fuel cost concerns grew. The issue is not demand but margins: unless carriers raise fares, a prolonged oil rally will erode profits quickly.
The bearish open faces a clear challenge. If shipping through the Strait of Hormuz clears up, oil prices could retreat and Treasury yields might slip, potentially inviting dip-buyers back into tech stocks after a string of upbeat earnings. However, if crude stays elevated and the 10-year yield stretches higher, what started as a stumble in futures could morph into a wider shakeout when the cash market opens at 9:30 a.m.
