Australian shares to drop after Wall Street slide

The news: The Australian sharemarket is set to tumble in early trading, tracking a sharp drop in the major US stock indices as investors continued to rotate out of high-priced mega cap growth stocks.

The numbers: The Dow Jones index fell 1.29% while the broader S&P 500 lost 0.78% and the tech-heavy Nasdaq declined 0.70%. In the local market, ASX 200 futures were down 87 points or 1.09% to 7,903 points at 7.00am AEST on Friday.

The context: All three major US stock indices experienced losses a day after the Nasdaq posted its biggest one-day drop since December 2022 and the chip sector suffered its largest daily percentage plunge since the pandemic-related shutdown panic of March 2020. In economic news, initial jobless claims data landed above analysts' estimates, providing further evidence that the US labour market is softening. This is a necessary step toward putting inflation on a sustainable downward path, according to the US Federal Reserve.