Dow futures drop 270 points as heavy selling returns to Wall Street before key inflation reading: Live updates

U.S. stock futures fell on Friday with big selling returning to Wall Street after a one-day respite. The latest reading of the Federal Reserve's favorite inflation gauge was due Friday morning.

Futures tied to the Dow Jones Industrial Average lost 297 points, or about 0.6%. S&P 500 futures shed around 1.1%. Nasdaq 100 futures dropped 1.7% with tech shares in the premarket seeing the biggest declines.

Shares of Tesla, a big winner of 2024 and in the post-election run, was off by 5% in premarket trading. Nvidia, the star of the bull market, fell 3%. Palantir and Dell shares were also lower.

Also weighing on sentiment was the failure Thursday night of a Trump-endorsed House Republican measure to fund the government for three months and avert a government shutdown. Without a deal to fund the government and a bill that's passed the House and Senate and has been signed into law, a partial shutdown is slated to start Friday night.

During Thursday's trading session, the Dow eked out a 15-point gain and ended a 10-day losing streak — its longest since 1974. The small gain came a day after the Dow plunged 1,100 points on Wednesday. The Dow is down 3.4% on the week, headed for its worst weekly performance since March 2023. The S&P 500 and Nasdaq are each off around 3% on the week.

Investors are now looking ahead to November's reading of the personal consumption expenditures price index – the Federal Reserve's preferred inflation metric. The report takes on even more significance after Fed Chair Jerome Powell indicated this week that the Fed would cut interest rates fewer times next year in part because of stubborn inflation. The Fed's outlook was the catalyst for the market's plunge on Wednesday.

Analysts polled by Dow Jones expect the PCE price Index to rise 0.2% on the month and show an annual reading of 2.5%. Core inflation, which excludes food and energy, is also expected to rise 0.2% on a monthly basis and 2.9% annually, above the Fed's 2% target.

"Whatever the reaction is going to be, it's probably going to be more severe one way or the other than it would have been prior to seeing the Fed really increase those expectations," Mike Dickson, head of research and quantitative strategies at Horizon Investments, told CNBC.

The 10-year Treasury yield popped above 4.5% this week, also weighing on equities.

– CNBC's Sarah Min and Christina Wilkie contributed to this report.

Wall Street's fear gauge perks up again Friday

Wall Street's fear gauge — the VIX — perked up again Friday, following its second-biggest spike in history earlier this week after the Federal Reserve said it would pare back its rate-cutting campaign.

The CBOE Volatility Index topped the 26 handle in the early morning, rising 9% from the previous session. It was last at 26.16

On Wednesday, the measure soared 74% to close at 27.62, up from around 15 earlier that same day. That increase was the second-greatest in history, following a 115% rise to above the 37 level back in February 2018 when there was a blow-up in funds tracking the volatility index.

— Sarah Min

Stock futures slip after House GOP funding plan fails

U.S. stock futures inched lower after a House Republican spending deal to avert a government shutdown failed Thursday night.

Thirty-eight Republicans voted against the bill, which was endorsed by President-elect Donald Trump. All Democrats — with the exception of two who supported the measure and one who voted present — were against it as well.

— Sean Conlon, Christina Wilkie

Short sellers targeting automakers as analysts issue more sell ratings, S3 Partners says

Short sellers are putting more automakers in their cross hairs in the wake of a stepped-up number of sell ratings from Wall Street analysts, according to S3 Partners, which specializes in monitoring short selling activity.

"Major global auto stocks have experienced significant declines in 2024, with many facing growing short positions and increased analyst sell recommendations," S3 researchers said. "Notable patterns emerge across regions, with larger companies like Toyota, Volvo, and Porsche showing a rise in short interest and sell ratings, while smaller firms exhibit persistent short positions with minimal shifts in analyst sentiment."

U.S. automakers or stocks traded here with large short positions include Lucid Group ($8 billion market cap), Rivian Automotive ($15 billion) and Winnebago Industries ($1.5 billion), alongside American depositary receipts of NIO ($9 billion).

"For the major stocks in each region, the short position has grown as the stock has fallen," S3 said. "For the smaller stocks, many had large short positions to begin with."

— Scott Schnipper

Investors should ‘look through’ a government shutdown, Wells Fargo Investment Institute says

Lawmakers in Washington are scrambling to head off a last-minute government shutdown, but investors should make sure to stay in their seats, according to Wells Fargo Investment Institute.

President-elect Donald Trump backed a plan that House Republicans pulled together. The measure could go to a vote as early as Thursday evening, and if it's approved it could avert a shutdown that would start on Friday night.

"We doubt there will be a new agreement in time to avert a partial shutdown after December 20, but expect a new spending bill around the end of the year," said Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute.

He said that his team thinks there is "likely to be little economic or financial-market impact" in the event of a shutdown and that discretionary spending – not Social Security or Medicare payments – will feel the effect. He recommended maintaining current portfolio positions.

"We continue to foresee a strong economy heading into 2025 – we maintain our outlook for earnings growth and an S&P 500 Index target range of 6500-6700," Christopher wrote. "We are making no changes in guidance and prefer to look through any shutdown."

—Darla Mercado

FedEx, Nike among the stocks making moves after hours

Check out the stocks making big moves in extended trading:

• FedEx – Shares rose 8% following the delivery giant's better-than-expected earnings. For its fiscal second quarter, FedEx reported adjusted earnings of $4.05 per share, above the $3.90 per share that analysts surveyed by LSEG were expecting. Revenue, however, came in weaker-than-expected. The company also announced that it's planning on spinning off its freight business.
• Nike – The retailer's stock popped around 6% after its fiscal second quarter results topped Wall Street estimates. Nike earned 78 cents per share on $12.35 billion in revenue. Analysts were expecting 63 cents per share on revenue of $12.13 billion, according to LSEG.
• Mission Produce – Shares gained 9% on the heels of the company's fiscal fourth quarter results beating analysts' expectations. Mission Produce posted adjusted earnings of 28 cents per share on revenue of $354.4 million. That's an improvement from the 11 cents per share in adjusted earnings the company posted in the year-ago period. Revenue also rose 37% from a year earlier.

Read the full list here.

— Sean Conlon

Stock futures open higher

U.S. stock futures inched higher Thursday night.

Futures tied to the Dow Jones Industrial Average gained 36 points, or 0.08%, while S&P 500 futures and Nasdaq 100 futures rose 0.1% and 0.2%, respectively.

— Sean Conlon