AMZN Amazon.com Inc

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to regain ground following the steep drop seen in the previous session.

Traders may look to pick up stocks at somewhat reduced levels following the sharp pullback seen last Friday, which came amid concerns about a surge by inflation expectations and new tariff threats from President Donald Trump.

The upward momentum on Wall Street comes even though Trump has threatened to impose a 25 percent on all steel and aluminum imports into the U.S.

The latest tariff threat comes after Trump said last Friday he plans to announce reciprocal tariffs on many countries this week, with the U.S. imposing tariffs on imports equal to the rates imposed on American exports.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of key U.S. economic data in the coming days.

Reports on consumer and producer inflation are likely to be in focus, while reports on retail sales and industrial production may also attract attention.

Traders are also likely to keep a close eye on congressional testimony by Federal Reserve Chair Jerome Powell, looking for clues about the outlook for interest rates.

Stocks moved sharply lower during trading on Friday, giving back ground after trending higher over the previous few sessions. The major averages turned negative within the first hour of trading and saw further downside as the day progressed.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Nasdaq dove 268.59 points or 1.3 percent to 19,523.40, the Dow tumbled 444.23 points or 1.0 percent to 44,303.40 and the S&P 500 slumped 57.58 points or 1.0 percent to 6,025.99.

With the significant pullback on the day, the major averages also closed lower for the week. The S&P 500 dipped by 0.2 percent, while the Dow and the Nasdaq both fell by 0.5 percent.

The weakness that emerged early in the session came after the University of Michigan released a report showing consumer sentiment has unexpectedly deteriorated in February amid a surge by year-ahead inflation expectations.

The University of Michigan said its consumer sentiment index slumped to 67.8 in February after rising to 71.1 in January. Economists had expected the index to inch up to 72.0.

With the unexpected decrease, the consumer sentiment index dropped to its lowest level since hitting 66.4 in July 2024.

The deterioration by consumer sentiment came as year-ahead inflation expectations spiked to 4.3 percent in February from 3.3 percent in January, reaching the highest level since November 2023.

“Many consumers appear worried that high inflation will return within the next year,” said Surveys of Consumers Director Joanne Hsu. “This is only the fifth time in 14 years we have seen such a large one-month rise (one percentage point or more) in year-ahead inflation expectations.”

Stocks saw further downside after President Donald Trump said he plans to announce reciprocal tariffs on many countries next week, with the U.S. imposing tariffs on imports equal to the rates imposed on American exports.

Traders were also reacting to mixed U.S. jobs data, with a closely watched Labor Department report showing weaker than expected job growth in January but an unexpected decrease by the unemployment rate.

The report said non-farm payroll employment rose by 143,000 jobs in January compared to economist estimates for an increase of about 170,000 jobs.

Meanwhile, employment in December and November surged by upwardly revised 307,000 jobs and 261,000 jobs, respectively, reflecting a net upward revision of 100,000 jobs.

The Labor Department also said the unemployment rate dipped to 4.0 percent in January from 4.1 percent in December. The unemployment rate was expected to remain unchanged.

“An unemployment rate at 4% is considered very low, giving the Fed reason to keep fed funds unchanged in the near term,” said Jeffrey Roach, Chief Economist for LPL Financial.

Housing stocks saw substantial weakness amid a notable increase by treasury yields, dragging the Philadelphia Housing Sector Index down by 2.7 percent.

Significant weakness was also visible among retail stocks, as reflected by the 2.4 percent slump by the Dow Jones U.S. Retail Index.

A steep drop by Amazon (NASDAQ:AMZN) weighed on the sector, with the online retail giant tumbling by 4.1 percent after reporting better than expected fourth quarter results but providing disappointing sales guidance for the current quarter.

Biotechnology, semiconductor and software stocks also saw considerable weakness, while airline stocks were among the few groups to buck the downtrend.

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