U.S. equity futures edged lower on Thursday, reflecting cautious investor sentiment ahead of key labor market data, while defense-sector shares outperformed after fresh signals pointed to a substantial increase in military spending under former President Donald Trump’s proposed budget plans.
Contracts tied to the S&P 500, Dow Jones Industrial Average, and Nasdaq 100 all traded modestly lower in early premarket activity. The pullback follows a recent rally and comes as markets position for the upcoming U.S. nonfarm payrolls report, a critical indicator for assessing the strength of the economy and the future path of interest rates.
Technology Shares Cool After Recent Gains
Technology stocks were among the main drags on futures, as investors pared exposure to high-growth names following strong recent performance. The sector’s weakness contributed to broader market softness, offsetting gains in more defensive and industrial corners of the market.
Analysts noted that profit-taking, rather than a shift in fundamentals, appeared to be driving the move, with traders remaining sensitive to incoming macroeconomic data.
Defense Contractors Rally on Budget Outlook
In contrast, defense and aerospace stocks posted solid gains after Trump outlined plans to significantly raise U.S. military spending, proposing a defense budget of roughly $1.5 trillion for 2027. That figure would represent a sharp increase from the approximately $900 billion allocated for 2026.
Shares of major defense contractors including Lockheed Martin, Northrop Grumman, RTX, and Kratos Defense & Security Solutions climbed between mid-single and high-single digits in early trading.
While Trump has previously suggested restricting dividends and share buybacks until production targets improve, investors appeared focused on the longer-term revenue implications of higher government defense outlays. Market participants cautioned, however, that any budget increase would still require congressional approval and could face political resistance.
Economic Data in Focus
Beyond defense spending, attention remained fixed on the broader economic picture. Weekly jobless claims showed a modest increase, hinting at some cooling in the labor market, though not enough to suggest a sharp slowdown.
Rating agency Fitch Ratings recently revised its U.S. growth outlook, forecasting economic expansion of just over 2% in both 2025 and 2026, citing lingering uncertainty and delayed data releases tied to last year’s government shutdown.
Market Outlook
As the new year progresses, investors are weighing fiscal policy expectations against economic signals and central bank uncertainty. While defense stocks are benefiting from renewed spending optimism, broader equity markets remain vulnerable to volatility as traders await clearer direction from economic data and policy developments.
