Stock Futures Drop, Led by Retreat in Technology Stocks

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U.S. stock futures declined Thursday even as fresh weekly data showed a continued recovery in the labor market.

Futures tied to the S&P 500 fell 0.7%, pointing to a slide for the broad market gauge after the opening bell. It ground 0.1% higher on Wednesday. Nasdaq-100 futures dropped 1% Thursday, suggesting a retreat for technology stocks.

The latest figures on initial jobless claims showed that 385,000 people applied for unemployment insurance last week, a new pandemic low.

Investors said Friday’s jobs report will offer insights into the recovery in the labor market, which Fed officials have said they remain concerned about.

The downturn in futures is “reflecting some nervousness ahead of the data. Volatility in markets has been low recently, so the potential for a surprise is large,” said Sebastien Galy, a macro strategist at Nordea Asset Management. “This could spook the market quite significantly.”

The U.S. nonfarm private sector added 978,000 jobs in May, compared with 742,000 in April, according to a report Thursday from ADP. This was significantly higher than economists had expected at 623,000.

The major indexes have been sluggish this month as investors weighed some signs that the economic rebound might slow or falter, with snarled supply chains bolstering input costs for an array of products. Concerns about high valuations for many stocks following the monthslong rally in U.S. markets are also giving some investors pause.

A Federal Reserve report on Wednesday noted a pickup in growth as consumers return to restaurants and stores, but also said supply-chain disruptions and acute labor shortages are leading to price increases.

“There is a continued focus on inflation and central banks and when they taper,” said Caroline Simmons, U.K. chief investment officer at UBS Global Wealth Management. “If the labor market comes in stronger than people are expecting, it will then raise the debate that the economy is on track, job growth is good and therefore we’ll end up with wage increases and at some point, domestic inflation.”

Ahead of the market opening, AMC Entertainment Holdings slid almost 7%, erasing its earlier gains, after the company filed with regulators to sell more than 11 million new shares. “Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment,” the company said in the SEC filing.

Meanwhile, a handful of other stocks popular on online forums continued to soar in frenzied trading. BlackBerry BB 31.92% gained over 14%. Sundial Growers SNDL 13.00% was also among the other small stocks to see outsize moves, climbing 9%.

“These are quite astonishing price reactions, but if something goes up that much, it usually comes down again, as it’s not based on fundamentals,” said Ms. Simmons. “These things usually don’t end well, it is very volatile and people can lose quite a lot of money depending on when they go in and when the stock corrects.”

Surveys of purchasing managers, slated to be released at 9:45 a.m., are expected to offer insights into the recovery of the U.S. services industry in May, which was among the hardest-hit by the lockdowns. Another gauge of services activity will also go out at 10 a.m.

“We’re seeing some peaking and plateauing of the data” as the rate of change from the lows of the pandemic smooths out, said Grace Peters, an investment strategist at J.P. Morgan Private Bank. “This does lead to some indigestion in markets: We’ve seen equity markets plateau over the last month, which is very much tied to peak data.”

In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 1.611% from 1.591% on Wednesday. Yields rise when prices fall.

Overseas, the pan-continental Stoxx Europe 600 pulled back from a record high, easing down 0.6%.

In Asia, the major benchmarks ended trading on a mixed note. The Shanghai Composite Index slipped almost 0.4%, while Japan’s Nikkei 225 advanced 0.4%. Hong Kong’s Hang Seng Index declined 1.1%.

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

Photo: Courtney Crow/Associated Press

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com

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