Tech Futures Rally After Brutal Trading Week

U.S. stock futures rose, suggesting markets could stage a relief rally at the end of a punishing week of losses across major indexes. 

Futures tied to the S&P 500 rose 1% Friday, while those for the Dow Jones Industrial Average added 0.6%. Contracts for technology-heavy Nasdaq-100 jumped 1.6%.

Twitter

TWTR -2.19%

shares plunged 21% premarket after

Tesla

chief executive

Elon Musk

tweeted that his deal to buy the social-media company is “temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” Mr. Musk last month struck a $44 billion deal to take Twitter private.

The moves higher in the U.S. market followed a late-session rally on Thursday that helped the Nasdaq Composite eke out a gain. Risk-on sentiment carried into international stock markets overnight. By Friday morning in the U.S., investors were scooping up shares of beaten-down technology companies before the opening bell 

Investors described the rebound as a reprieve from a market selloff that has put all three major U.S. indexes on pace for their worst week since late January. As of Thursday’s close, the Nasdaq Composite was down 6.4% this week. The Dow, meanwhile, is on pace to fall 3.6% and extend its losses into a seventh consecutive week—its longest losing streak since 2001.

“This might just be a buy-the-dip rally and a dead-cat bounce than anything else,” said Greg Swenson, founding partner of Brigg Macadam, a London-based investment bank. Looking ahead, he said, he sees further losses for the U.S. stock market. “Even great companies are going to be suffering with the market.”

Investors are currently confronting issues not seen in decades as inflation continues to hover near a four-decade high. Many traders are now reckoning with the growing risk of a recession as the Federal Reserve attempts to get pricing pressures under control. Many institutional and individual investors alike have begun to discount the idea that the Fed can engineer a so-called soft landing, during which inflation falls but unemployment stays low and the economy keeps growing.

On Thursday, Fed Chairman

Jerome Powell

acknowledged that getting inflation under control could create a short-term hit to the economy, saying on the Marketplace radio program that “the process of getting inflation down to 2% will also include some pain.”

He repeated his view that further half-percentage point increases would likely be appropriate at coming meetings, but said the central bank could consider larger increases if economic data call for such steps.

This week’s inflation report offered little solace to investors, especially after data showed that price pressures were largely broad based. Even as gasoline prices eased, prices rose for groceries as well as dining out, airline travel and other services, spooking investors who had hoped that inflation had peaked. 

That forced many to sell off riskier investments and pile into assets perceived as safer. Growth and technology stocks, which are typically hurt by higher interest rates, in particular were walloped. But the risk-off sentiment rippled elsewhere, leading to sharp plunges in cryptocurrencies, too. 

“This week was like a pivot in the markets. The mood has changed from evaluating if we can live in an economy with higher rates to [investors] asking: ‘Are we on the brink of a recession?’ ” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. 

On Friday, however, technology stocks were among those that led the rebound premarket. Tesla jumped 5.7%,

Nvidia

added 3.1% and Netflix gained 2.3%.

Robinhood

surged 21% premarket after

Sam Bankman

-Fried, the founder of the cryptocurrency exchange FTX, disclosed he bought a 7.6% stake in the brokerage. 

Duolingo

jumped 18% before the opening bell after the language-learning platform reported a sharp jump in revenue and monthly active users.

Bitcoin climbed 5.7% to about $30,205 on Friday, from its 5 p.m. ET level of $28,572.24 on Thursday. Yet elsewhere in the cryptocurrency markets, the beleaguered stablecoin TerraUSD continued to spiral lower, trading at 11 cents at 4 a.m. ET. A so-called stablecoin for its typical peg to $1, TerraUSD broke from that level last weekend following a wave of selling of the token. Its sister token Luna also has fallen precipitously this week, trading at half a penny at 4 a.m., down from more than $60 on Monday.

Traders worked on the floor of the New York Stock Exchange on Thursday.



Photo:

John Minchillo/Associated Press

In the bond market, the yield on the benchmark 10-year U.S. Treasury note climbed to 2.902%, from 2.815% Thursday, reversing a four-day yield slide that came as investors piled back into bonds. Yields climb when bond prices decline. 

The WSJ Dollar Index, which measures the greenback against a basket of other currencies, slipped 0.2%, on pace to break a six-day winning streak. 

Overseas stock markets also traded higher Friday. In Europe, the pan-continental Stoxx Europe 600 climbed 1.1%. In Asia, Hong Kong’s Hang Seng added 2.7%, while Japan’s Nikkei 225 jumped 2.6%. The Shanghai Composite gained 1%.

—Caitlin Ostroff contributed to this article.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

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