Stock futures in the US were little changed on Friday, following significant declines in the S&P 500 and the Nasdaq. Both indices experienced their worst day since April amid a selloff in megacap stocks. A lower-than-expected inflation print for the US raised bets that the Federal Reserve will soon cut interest rates, prompting investors to shift their focus to stocks that would benefit more from lower borrowing costs, including small-cap stocks.

Megacaps showed mixed performance before the opening bell:

Microsoft (-0.1%)

Apple (0.1%)

Nvidia (-0.4%)

Amazon (0.2%)

Meta (-1.5%)

Alphabet (0.1%)

Meanwhile, the earnings season began with major banks releasing their quarterly results. JPMorgan declined about 0.6% in premarket trading despite beating revenue and earnings expectations. Wells Fargo dropped nearly 5% after slightly lowering its outlook for the year. Conversely, the Bank of New York Mellon saw a gain of 2.5% following better-than-expected Q2 earnings.

For the week, the S&P 500 gained 0.3%, and the Dow Jones rose about 1%, while the Nasdaq lost nearly 0.4%.

Market Dynamics and Investor Sentiment

The significant drop in the S&P 500 and Nasdaq can be attributed to a broader megacap selloff, where investors offloaded shares in some of the largest and most valuable companies. This move came as a reaction to a lower-than-expected inflation print for the US, which heightened expectations that the Federal Reserve might soon cut interest rates. Such a rate cut is seen as beneficial for small-cap stocks, which generally benefit more from lower borrowing costs.

Megacap stocks, which include some of the most influential tech companies, showed mixed results in the premarket session. Microsoft saw a minor decline of 0.1%, while Apple edged up by 0.1%. Nvidia fell by 0.4%, and Amazon increased slightly by 0.2%. Meta experienced a more substantial drop of 1.5%, and Alphabet rose by 0.1%.

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Bank Earnings Impact

The earnings season for major banks began with a mixed set of results that affected stock movements. JPMorgan reported a decline of 0.6% in premarket trading, despite surpassing revenue and earnings estimates. Wells Fargo saw a significant drop of almost 5% after the bank slightly dimmed its outlook for the year, which weighed on investor sentiment. In contrast, the Bank of New York Mellon posted better-than-expected Q2 earnings, leading to a 2.5% rise in its stock price.

Weekly Performance Overview

Despite the turbulence, the weekly performance of major indices showed some resilience. The S&P 500 managed to gain 0.3%, and the Dow Jones rose by about 1%. However, the Nasdaq did not fare as well, losing nearly 0.4% over the week.

Conclusion

The stability in US stock futures on Friday, after a sharp decline in the S&P 500 and Nasdaq, underscores the market's ongoing adjustment to evolving economic data and corporate earnings. Investors are keenly watching the Federal Reserve's next moves on interest rates, especially in light of the recent inflation data. As the earnings season progresses, further insights into corporate health and economic outlooks will shape market directions in the coming weeks.

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