Stock Market

U.S. stock futures tick higher as Fed’s preferred measure of inflation remains hot, but cools

U.S. stock-index futures added to gains after the Federal Reserve’s preferred measure of inflation for April proved in line with market expectations, with the smallest increase in a year and a half. 

How are stock-index futures trading?
  • S&P 500 futures

    rose 30.75 points, or 0.8%, to 4,086.50.

  • Dow Jones Industrial Average futures

    rose 119 points, or 0.4%

  • Nasdaq-100 futures

    were up 149 points, or 1.2%, at 12,428.25.

On Thursday, the Dow industrials

rallied 516.91 points, or 1.6%, to 32,637.19, a fifth-straight gain and its longest winning streak since March 18, according to Dow Jones Market Data. The S&P 500

rose 2% to 4,057.84 and the Nasdaq Composite

rose 2.7% to 11,740.65.

All three indexes are looking at gains of 3% to 4% for the week. The S&P 500 is poised for its first weekly gain in eight weeks, according to FactSet.

What’s driving the markets?

The personal consumption expenditure index rose just 0.2% in April for its smallest monthly increase in a year and a half, due largely to a decline in gas prices which have subsequently rebounded, though there were other hints that a surge in inflation might be abating.

The rate of core inflation in 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 saw back-to-back declines was in the first few months of the pandemic in early 2020.

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And: What if we get a ‘soft landing’ for the economy after all?

Thursday’s gains in stocks stemmed from some relief over the minutes of the Fed’s early May meeting which drove speculation over a potential pause in interest rates hikes later this year. A hardy batch of earnings reports from retailers also helped boost stock prices.

Read: Forget the ‘Fed put’ – here is how corporate buybacks could rescue stocks

On Friday Big Lots Inc.

shares sank 20% after the big-box retailer swung to a surprise loss and sales miss. Stocks in Gap Inc.

tumbled 15% after the clothing retailer reported a wider-than-expected loss and disappointing forecast. Costco Wholesale Corp.

raked in $1 billion more than expected in revenue in its latest quarter, but missed on same-store sales and shares slipped 1% in premarket.

While major U.S. stock indexes are poised for gains his week, wariness remains among analysts over whether Wall Street volatility may have ebbed for now. “The equity market reacted exuberantly to the near term recession fears abating, but the haven bid has not faded from the Treasury market,” said Michael O’Rourke, chief market strategist at JonesTrading,

“It is only a matter of time before yields are back above 3%. If it happens in the next few days, that month end rebalance will flip. Fading recession fears and the prospect of China reopening is setting the stage for energy to breakout,” as crude and natural-gas prices remain elevated, he said.

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“The upward inflation spiral is teetering on heading to a very painful place. As
we have noted repeatedly, the longer markets continue to deny the reality of the need to reprice and tighten financial conditions, the more leeway the FOMC has to continue to tighten,” said O’Rourke.

See: Even this pessimistic Bank of America strategist says the bear-rally bandwagon has room to charge ahead

What companies are in focus?
How are other assets trading?
  • The yield on the 10-year Treasury note

     fell 2 basis points to 2.726%. Yields and Treasury prices move opposite each other.

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

  • Oil futures

     fell, with West Texas Intermediate crude for July delivery 

    down 0.7% to $113.26 a barrel. Gold 

     for June delivery rose 0.4% to $1,856.30 an ounce.

  • Bitcoin 

    was off 2.4% to $28,930.

  • In European equities, the Stoxx Europe 600 

     rose 0.8%, while London’s FTSE 100

    gained 0.2%.

  • In Asia, the Shanghai Composite 

    rose 0.2%, while Hong Kong’s Hang Seng Index 

     rose 2.8% and Japan’s Nikkei 225 index 

    rose 0.6%.

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