By Barbara Kollmeyer, MarketWatch
Dow, S&P 500 in correction territory after Thursday's plunge
U.S. stock futures rose across the board early Friday, but volatility was close by. Investors appeared uneasy at the end of a bruising week for stocks, one that could be the worst the Dow has seen since the height of the financial crisis in 2008.
A more-than-1,000 point drop for the Dow late Thursday was weighing on global markets Friday, with Chinese stocks bearing the brunt of the blow, dropping as much as 6% at one point.
The losses came on mounting fears that faster-than-expected inflation will lead to more Federal Reserve hikes this year than currently expected.
The shutdown of the federal government was yet another worry for investors, as lawmakers worked through the night to get a budget deal through after funding ran out Thursday midnight.
What are the main benchmarks doing?
Dow Jones Industrial Average futures rose 109 points, or 0.5%, to 24,077, while S&P 500 futures added 16.85 points, or 0.7%, to 2,610.25. Nasdaq-100 futures gained 46.50 points, or 0.8%, to 6,363.75.
Stocks went into freefall late Thursday , with the Dow Jones Industrial Average plunging 1,032.89 points, or 4.2%, to close at 23,860.46 and log its second-worst point decline ever. The S&P 500 index skidded 100.66 points, or 3.8%, to finish at 2,581, while the Nasdaq Composite Index sank 274.82 points, or 3.9%, to end at 6,777.16.
The Dow and S&P 500 were left off 10.4% and 10.2%, respectively, from their all-time highs. That puts them both in correction territory, which is usually defined as a pullback of at least 10% from a recent peak.
The Cboe Volatility Index soared 24% to 34.48 on Thursday.
Don't miss:Jim Cramer blames a 'group of complete morons' for blowing up the market
What's driving markets?
Driven by volatility worries and inflation concerns, stocks are facing their worst weekly performances in years, with the Dow down 6.5% as of Thursday's close. A drop of that magnitude has not been seen since the week of Oct. 10, 2008, when the Dow plummeted 18.15% in the thick of the global financial crisis.
However, should stocks mount a recovery Friday, that weekly loss might come nearer to a 6.2% drop in the week ending Jan. 8, 2016, or a drop of 6.4% in the week ending Sept. 23, 2011.
The S&P 500 is down 6.6% for the week, as of Thursday's close. That would mark the biggest weekly drop since a 7.2% decline in the week ended August 5, 2011.
Futures action indicates investors may be tempted to pick up cheap stocks, though some may choose to stay on the sidelines ahead of the weekend. Warnings in the run-up to what has been a breathless climb for stocks have been fairly persistent.
Volatility seemed to ebb a tiny bit, with futures for the Cboe Volatility Index down 5.3% to 31.68, according to FactSet Research.
Politics will stay in focus for investors as the Senate approved a two-year budget deal and stopgap spending bill early Friday, but the package arrived too late at the House to prevent a government shutdown . A vote in the House is expected early Friday, with approval there and a signature from President Donald Trump required to halt that shutdown.
Wholesale trade data for December is the only major item on the economic docket. That report is due at 10 a.m. Eastern Time.
Check out:MarketWatch's Economic Calendar
What are strategists saying?
Konstantinos Anthis, researcher at ADS Securities, said markets could be looking to consolidate as a rough week comes to a close.
"Nevertheless, the sentiment is clearly negative, and with central banks poised to tighten their monetary policies on a global scale, yields are expected to continue moving higher and stocks to come under more pressure," Anthis said in a note to clients.
As for stock futures gains, Joel Kruger, currency strategist at LMAX Exchange, had this to say in emailed comments: "I wouldn't read much into it. I think there are larger forces at play here ... namely the fact that policy normalizations are starting to move out of their infancy and the stock market is finally understanding the negative implication."
Check out: Fed's George says 3 rate hikes this year is 'reasonable baseline'
What are other assets doing?
European stocks mostly fell across the board, while Wall Street's late plunge hit Asia markets hard , with several indexes posting their worst week in years. The Shanghai Composite Index closed down 4%, after losing as much as 6% in the session, while the Nikkei 225 index dropped 2.3%.
After trading above 2.80% all of Thursday's session, the yield on 10-year Treasury notes remained elevated at 2.858%.
Gold futures were modestly lower, snapping a four-day losing streak. Crude-oil futures fell 1%, while the ICE U.S. Dollar Index was modeslty higher.
Sign up here to get our Need to Know column delivered to your email box.