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
    ES00,
    +0.67%

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

  • Dow Jones Industrial Average futures
    YM00,
    +0.31%

    rose 119 points, or 0.4%

  • Nasdaq-100 futures
    NQ00,
    +1.10%

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

On Thursday, the Dow industrials
DJIA,
+1.61%

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
SPX,
+1.99%

rose 2% to 4,057.84 and the Nasdaq Composite
COMP,
+2.68%

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.
BIG,
+2.41%

shares sank 20% after the big-box retailer swung to a surprise loss and sales miss. Stocks in Gap Inc.
GPS,
+4.41%

tumbled 15% after the clothing retailer reported a wider-than-expected loss and disappointing forecast. Costco Wholesale Corp.
COST,
+5.65%

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
    TMUBMUSD10Y,
    2.745%

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

  • The ICE Dollar Index 
    DXY,
    -0.07%
    ,
     which measures the greenback against major currencies, was up 0.2%.

  • Oil futures
    CL00,
    -0.56%

     fell, with West Texas Intermediate crude for July delivery 
    CLN22,
    -0.56%

    down 0.7% to $113.26 a barrel. Gold 
    GC00,
    +0.12%

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

  • Bitcoin 
    BTCUSD,
    -0.73%

    was off 2.4% to $28,930.

  • In European equities, the Stoxx Europe 600 
    SXXP,
    +1.12%

     rose 0.8%, while London’s FTSE 100
    UKX,
    +0.43%

    gained 0.2%.

  • In Asia, the Shanghai Composite 
    SHCOMP,
    +0.23%

    rose 0.2%, while Hong Kong’s Hang Seng Index 
    HSI,
    +2.89%

     rose 2.8% and Japan’s Nikkei 225 index 
    NIK,
    +0.66%

    rose 0.6%.

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