Stock futures turn flat after weaker-than-expected housing data

Futures contracts tied to the major U.S. stock indexes pared gains in early trading Tuesday after data showed housing starts dropped sharply last month.

Dow Jones Industrial average futures rose just 9 points after climbing nearly 100 points earlier. S&P 500 futures gained 0.1%. Futures on the tech-heavy Nasdaq 100 index added 0.5%.

Housing starts tumbled 9.5% to a seasonally adjusted annual rate of 1.569 million units last month, the Commerce Department said on Tuesday. Economists polled by Dow Jones had forecast starts falling to a rate of 1.7 million units in April.

Futures earlier rebounded after better-than-expected earnings from Home Depot and a rebound in tech shares.

Home Depot shares jumped 2% in early trading, set to add to their 20% gains year-to-date already. The retailer reported earnings of $3.86 a share for the previous quarter, much higher than the $3.08 expected by analysts polled by Refinitiv. Net sales surged 32.7%, more than expected.

Walmart shares gained 1% in premarket trading after reporting strong grocery sales and e-commerce growth for the quarter.

Major tech stocks were higher in the premarket. Facebook, Amazon, Apple and Microsoft were higher in premarket trading. Nvidia gained 1%.

On Monday, lingering weakness in technology stocks led the major indexes lower.

The Dow Jones Industrial Average dipped 54.34 points, or 0.2%, to 34,327.79. The S&P 500 lost 0.3% to 4,163.29 as the tech sector pulled back 0.7%. The Nasdaq Composite fell 0.4% to 13,379.05.

Big Tech stocks fell to start the week, with Apple and Netflix each down 0.9%. Microsoft shed 1.2%, while Tesla dropped more than 2% as famed investor Michael Burry revealed a big short position on the electric carmaker.

Growth-heavy stocks have remained under pressure in recent sessions as investors fret over whether a pop in inflation will entrench or blow over as the Federal Reserve expects. Inflation above the Fed’s 2% target for a sustained period could prompt the central bank to tighten monetary policy and dampen stocks that outperform the market when interest rates are low.

“Surging inflation data intensified the rift between secular growth stocks, which depend on lower-for-longer interest rates, and value-based investments, which need a steepening yield curve,” wrote Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.

“Although markets anticipated a step change in the data due to economic reopening, the magnitude of the surprises has been outsized, driving equity volatility up and market indexes down from all-time highs,” she added. “Supply/demand imbalances in commodities, manufactured goods and even labor explain much of the jump in inflation, backing the argument that trend is transitory.”

Investors blamed that angst for the S&P 500’s dismal performance last week, which saw the broad market index fall 4% through midweek amid heightened inflation fears. The broad equity benchmark eventually rebounded and ended the week down 1.4%.

The tech-heavy Nasdaq Composite, particularly sensitive to inflation fears, dropped 2.3% last week. The blue-chip Dow fell 1.1% in that period. All three benchmarks posted their worst week since February 26.

The Fed’s minutes from its last meeting, which will be released Wednesday, could offer some clues on policymakers’ thinking on inflation.

Elsewhere, the first-quarter earnings season is wrapping up with more than 90% of the S&P 500 companies having reported their results. So far, 86% of S&P 500 companies have reported a positive EPS surprise, which would mark the highest percentage of positive earnings surprises since 2008 when FactSet began tracking this metric.