U.S. stocks were poised to pull back from record highs on Friday as the euphoria over interest rate cuts faded, with FedEx (FDX) earnings providing a reality check.
S&P 500 futures (ES=F) fell about 0.3% after the benchmark index closed at an all-time high. Dow Jones Industrial Average futures (YM=F) were flat after posting a record close. Leading the declines were the tech-heavy Nasdaq 100 (NQ=F) down 0.5%.
Stocks rose on Thursday as investors embraced Federal Reserve Chairman Jerome Powell’s message that the Fed cut interest rates aggressively to support the economy, not save it — a notion reinforced by the jobless claims data.
But that massive rally is now faltering amid reminders that risks to growth may still exist. Wall Street is still wondering whether the Fed is too late to keep the economy on track for a “soft landing.” Traders are pricing in deeper cuts this year than policymakers had projected, according to Fed funds futures.
Read more: What the Fed’s rate cut means for bank accounts, CDs, loans, and credit cards
The Fed-fueled bullish sentiment also increases the risk of a bubble, according to Bank of America’s senior strategist. Michael Hartnett said stock prices are currently driven by policy easing and earnings growth, which is what’s driving investors to chase gains.
Late Thursday, FedEx reported a sharp drop in earnings, missing Wall Street estimates. The delivery company, a bellwether for the economy, saw its shares fall about 14% in premarket trading.
Elsewhere, Nike (NKE) shares jumped after the sportswear maker named a new CEO at a time when its sales are under pressure.