US stock futures tick higher as Fed’s favorite measure of inflation stays hot but cools

US stock index futures added to gains after the US Federal Reserve’s preferred inflation measure for April proved in-line with market expectations, rising at the smallest rate in a year and a half.

How are stock index futures traded?
  • S&P 500 Futures ES00,
    rose 30.75 points, or 0.8%, to 4,086.50.

  • Dow Jones Industrial Average Futures YM00,
    up 119 points or 0.4%

  • Nasdaq 100 Futures NQ00,
    rose 149 points, or 1.2%, to 12,428.25.

On Thursday, the Dow Industrials DJIA,
rose 516.91 points, or 1.6%, to 32,637.19, a fifth straight gain and the longest winning streak since March 18, according to Dow Jones Market Data. The S&P 500 SPX,
up 2% to 4,057.84 and the Nasdaq Composite COMP,
rose 2.7% to 11,740.65.

All three indices are expecting gains of 3% to 4% for the week. According to FactSet, the S&P 500 is poised for its first weekly gain in eight weeks.

What moves the markets?

The index of private consumption spending rose just 0.2% in April, the smallest monthly increase in a year and a half, mainly due to a fall in gas prices, which have subsequently recovered, although there have been other indications that an inflationary spurt could subside.

The rate of core inflation over the past year, the Fed’s preferred measure, slowed to 4.9% from 5.2%, a second straight decline. The last time the core rate posted consecutive declines was in the early months of the pandemic in early 2020.

And: What if we do get the economy to “soft-land”?

Thursday’s gains stemmed from some relief over the minutes of the Fed’s early May meeting, which fueled speculation about a possible pause in rate hikes later this year. A robust set of earnings reports from retailers also helped boost share prices.

Read: Forget the “Fed put” – this is how corporate buybacks could save stocks

On Friday Big Lots Inc. BIG,
Shares fell 20% after the big retailer suffered a surprise loss and failed to sell. Gap Inc. GPS stock,
fell 15% after the clothing retailer reported a bigger-than-expected loss and disappointing guidance. Costco Wholesale Corp. COSTS,
hit $1 billion in sales last quarter, but missed same-store sales and shares are down 1% premarket.

While major US stock indexes wait for gains this week, analysts remain skeptical that Wall Street volatility may have eased for now. “The stock market has reacted enthusiastically to the easing of near-term recession fears, but haven supply in the Treasury market has not gone away,” said Michael O’Rourke, chief market strategist at JonesTrading.

“It’s only a matter of time before yields are back above 3%. If it happens in the next few days, the rebalancing will be reversed at the end of the month. Easing recession fears and the prospect of China reopening sets the stage for an energy outbreak,” he said, as crude oil and natural gas prices remain elevated.

“The upward spiral of inflation is tumbling towards a very painful point. As
We have repeatedly noted that the longer markets continue to deny the need to rerate and tighten financial conditions, the more leeway the FOMC has to continue tightening,” O’Rourke said.

See: Even this pessimistic Bank of America strategist says the bear rally train has room to go

Which companies are in focus?
  • Dell Technologies Inc.
    The stock rose 9% after the computer equipment maker reported higher first-quarter sales and lower operating expenses.

  • Baidu Inc
    Hong Kong listed shares 9888,
    Soared 14% after the Chinese search engine’s first-quarter results beat expectations and several analysts raised their price targets. Equities listed in the US rose 1%.

  • Marvell Technology Inc. shares MRVL,
    rose 3% after the semiconductor giant announced solid earnings results and slightly better-than-expected guidance.

  • Ulta Beauty Inc.
    Shares rose 8% in premarket trading after the beauty products retailer raised its full-year sales and earnings guidance on Thursday after better-than-expected first-quarter results.

  • shares of Workday Inc.
    Plunged 8% after the human resources cloud software company reported earnings that missed Wall Street consensus on Thursday and raised its forecast slightly.

How are other assets traded?
  • The yield of the 10-year Treasury note TMUBMUSD10Y,
    fell 2 basis points to 2.726%. Yields and treasury prices move in opposite directions.

  • The ICE Dollar Index DXY,
    which measures the greenback against major currencies rose 0.2%.

  • oil futures CL00,
    fell, with West Texas Intermediate Crude for July delivery CLN22,
    down 0.7% to $113.26 a barrel. gold GC00,
    June delivery rose 0.4% to $1,856.30 an ounce.

  • bitcoin BTCUSD,
    down 2.4% to $28,930.

  • For European stocks of the Stoxx Europe 600 SXXP,
    up 0.8%, while London’s FTSE 100 UKX,
    up 0.2%.

  • In Asia, the Shanghai Composite SHCOMP,
    rose 0.2%, while Hong Kong’s Hang Seng Index HSI,
    rose 2.8% and Japan’s Nikkei 225 Index NIK,
    increased by 0.6%. US stock futures tick higher as Fed’s favorite measure of inflation stays hot but cools

Brian Lowry

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