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U.S. stock futures pointed to a significantly lower open for Wall Street's major indexes on Friday after the release of disappointing quarterly results from key tech companies.
Stocks pared losses, however, after the Commerce Department reported the U.S. economy grew at a 3.5 percent rate in the third quarter, faster than economists had expected. The government also said its personal consumption expenditures (PCE) index, a key measure of inflation, increased by 1.6 percent last quarter.
Stock have suffered in recent weeks as fears of rising inflation — and rising interest rates — trim corporate profit expectations. Since the PCE index is the Federal Reserve's preferred inflation gauge, any sign that the measure may be slowing could stall the central bank in its plan to continue to raise the overnight rate.
Still, around 8:44 a.m. ET, Dow Jones Industrial Average futures implied a drop of more than 240 points at the open on Friday. Meanwhile, the S&P 500 and Nasdaq 100 futures also pointed to steep losses.
One strategist said the move after-hours was driven by poorer-than-expected earnings from tech bellwethers Amazon AMZN and Google GOOGL -parent company Alphabet . Their shares fell 9.2 percent and 5.9 percent, respectively, in the premarket.
There were "high expectations" for this earnings season, King Lip, chief strategist at Baker Avenue Asset Management, told CNBC. "The earnings are not coming in as great as people had suspected," Lip said, adding that "for Amazon specifically, forward guidance was surprisingly light."
Amazon said Thursday that it expected revenue to come in the range of $66.5 billion and $72.5 billion in the fourth quarter, well below the Street's estimate of $73.79 billion. Alphabet's results also disappointed, with the internet giant reporting revenues of $33.7 billion in the third quarter, versus an expected $34.04 billion.
Vasu Menon of Singapore-based OCBC Bank, said earnings have been strong so far, but he added a note of caution. The vice president of OCBC's Group Wealth Management said investors already expected strong earnings, and they now fear the effects of the U.S.-China trade war, particularly going into next year.
Likely reversal of Thursday's recovery
U.S. stocks had seen a recovery on Thursday from steep losses in the previous trading session. The Dow Jones Industrial Average jumped by 401.13 points to close at 24,984.55, snapping a three-day losing streak. The S&P 500 saw gains of 1.9 percent to close at 2,705.57. The gains sent the Dow and S&P 500 back into positive territory for 2018, but barely.