Wall Street set for lower open amid recession worries

NEW YORK: U.S. stock indexes were set to open lower on Thursday as recession worries crept into the foreground of the earnings season, while shares of Procter & Gamble fell as it warned of cost pressures. A surprise fall in U.S. weekly jobless claims, suggested the labor market remained tight even in a high interest rate environment.

Corporate America has been hit by a challenging economic environment, with Microsoft Corp announcing 10,000 job cuts on Wednesday. With the quarterly reporting season underway, analysts noted that earnings estimates could decline even further as risks of a potential recession increase.

"The earnings picture is also looking weak and pointing to a recession," said Sam Stovall, chief investment strategist at CFRA research.

"Expectations are that earnings will fall in the fourth quarter of 2022 as well as the first two quarters of 2023." Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.8% for the fourth quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.

This comes after data on Wednesday showed retail sales, producer prices and production at U.S. factories fell more than expected in December, while November output was also weaker, adding to worries of a slowdown in the economy.

Leading Dow components were lower in premarket trading. Procter & Gamble Co fell 2.5% after warning of commodity costs pressuring profits, despite raising its full-year sales forecast. The S&P 500 and the Dow logged their biggest daily percentage declines in over a month in the previous session, with comments from Federal Reserve officials that highlighted the disparity between the central bank's estimate of its terminal rate and market expectations.

St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester stressed on the need to raise rates beyond 5% to bring inflation to heel, while money markets see the rate peaking at 4.85% by June, with a 25-basis point rate hike baked in for February.

At 8:58 a.m. ET, Dow e-minis were down 245 points, or 0.73%, S&P 500 e-minis were down 27.75 points, or 0.70%, and Nasdaq 100 e-minis were down 85.5 points, or 0.75%.

Netflix Inc is expected to report its slowest quarterly revenue growth after markets close on Thursday. The company's shares fell 0.9%. Tesla Inc fell 1.8%, leading declines among its growth peers Apple Inc, Amazon.com Inc and Microsoft Corp, whose shares were down between 0.7% and 1.4%.

Piper Sandler cut the target price on electric-vehicle maker Tesla's stock to $300 from $340.