Futures Firmly Positive Following Closely Watched Inflation Data

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to move to the upside following the mixed performance seen in the previous session.

The futures remained firmly positive following the release of a highly anticipated Commerce Department report showing consumer prices in the U.S. crept up in line with economist estimates in the month of June.

The Commerce Department said its personal consumption expenditures (PCE) price index inched up by 0.1 percent in June after coming in unchanged in May. The uptick by the index matched expectations.

The report also said the annual rate of growth by the PCE price index slowed to 2.5 percent in June from 2.6 percent in May. The slowdown in year-over-year growth also met estimates.

Meanwhile, the Commerce Department said the core PCE price index, which excludes food and energy prices, rose by 0.2 percent in June after inching up by 0.1 percent in May. Economists had expected another 0.1 percent uptick.

The annual rate of growth by the core PCE price index was unchanged from the previous month at 2.6 percent in June, while economists had expected the pace of growth to slow to 2.5 percent.

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending.

The report showed personal income rose by less than expected, while personal spending increased in line with economist estimates.

The markets may also benefit from bargain hunting after the tech-heavy Nasdaq and the S&P 500 fell to their lowest closing levels in over a month on Thursday.

U.S. stocks saw some heavy selling in the final hour of the session on Thursday as the mood turned a bit cautious amid concerns about mega-cap firms’ earnings.

Among the major averages, the Dow managed to settle higher, gaining 81.20 points or 0.2 percent to close at 39,935.07, a long way down from the day’s high of 40,438.82. The S&P 500, which advanced to 5,491.59, ended nearly 100 points down from that level, at 5,399.22, losing 27.91 points or 0.5 percent.

The Nasdaq ended with a loss of 160.69 points or 0.9 percent at 17,181.72, coming off a high of 17,544.46.

Stocks gained in strength earlier in the session thanks to data showing a sharper than expected acceleration in U.S. economic growth in the second quarter.

A report released by the Commerce Department showed real gross domestic product in the U.S. surged by 2.8 percent in the second quarter after jumping by 1.4 percent in the first quarter. Economists had expected GDP to increase by 2 percent.

The Commerce Department said the GDP growth primarily reflected increases in consumer spending, private inventory investment, and nonresidential fixed investment.

Compared to the first quarter, the acceleration in real GDP in the second quarter primarily reflected an upturn in private inventory investment and an acceleration in consumer spending, the Commerce Department said.

On the inflation front, the report said the personal consumption expenditures price index increased 2.6 percent in the second quarter compared with an increase of 3.4 percent in the first quarter.

Excluding food and energy prices, the PCE price index increased 2.9 percent in the second quarter compared with an increase of 3.7 percent in the first quarter.

A separate report from the Commerce Department said durable goods orders plunged by 6.6 percent in June after inching up 0.1% in May. Economists had expected durable goods orders to rise by 0.3 percent.

A report from the Labor Department showed initial jobless claims fell to 235,000 in the week ended July 20th, a decrease of 10,000 from the previous week’s revised level of 245,000.

Economists had expected jobless claims to dip to 238,000 from the 243,000 originally reported for the previous week.

Among the major losers in the session, Microsoft Corporation, Nvidia Corporation, Alphabet, Meta Platforms, Advanced Micro Devices, Intel Corporation, Micron Technology and Analog Devices ended down 1.4 to 4 percent.

Eli Lilly and Company ended down 4.5 percent. Honeywell International dropped 5.2 percent, Abbott Laboratories, Texas Instruments and Qualcomm Inc. also ended notably lower.

Tesla, Exxon Mobil Corporation, Johnson & Johnson, Home Depot, Abbvie Inc., Chevron Corporation, Salesforce.Inc., Thermo Fisher Scientific, Danaher Corporation, GE Aerospace, Blackstone, Philip Morris International, Caterpillar, Morgan Stanley, Goldman Sachs, Citigroup, Bank of America, Boeing Company and ADP ended with strong gains.

IBM rallied 4.3 percent. The company’s bottom line totaled $1.83 billion or $1.96 per share in the second quarter, compared with $1.58 billion or $1.72 per share in last year’s second quarter.

Commodity, Currency Markets

Crude oil futures are falling $0.38 to $77.90 a barrel after climbing $0.69 to $78.28 a barrel on Thursday. Meanwhile, after plummeting $62.20 to $2,353.50 an ounce in the previous session, gold futures are jumping $21.10 to $2,374.60 an ounce.

On the currency front, the U.S. dollar is trading at 154.31 yen versus the 153.95 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0857 compared to yesterday’s $1.0846.

Asia

Asian stocks steadied on Friday as strong U.S. GDP data and cooling inflation suggested a soft landing is in sight for the world’s largest economy.

Markets have raised their expectations for three rate cuts by the end of the year, with some economists expecting the Fed’s first rate cut to be extra-large.

It is believed the release of the PCE deflator, one of the Fed’s preferred price gauges, later today will shed further lightly on the outlook for rates.

China’s Shanghai Composite Index recovered from an early slide to close 0.1 percent higher at 2,890.90. Hong Kong’s Hang Seng Index finished marginally higher at 17,021.31 after volatile trading.

The Taiwan Weighted Index tumbled 3.3 percent as markets reopened from a two-day closure due to a typhoon.

Japanese markets closed lower, and the yen stabilized near a 12-week high against the dollar, heading into next week’s Bank of Japan policy meeting where a 10 -bps rate hike may be on the table.

The Nikkei 225 Index ended down 0.5 percent at 37,667.41, failing to sustain earlier gains. The broader Topix Index settled 0.4 percent lower at 2,699.54. Hino Motors surged 12.8 percent and Canon added 6.7 percent after reporting strong earnings.

Seoul stocks snapped a two-day losing streak, with financials and shipping firms leading the rebound. The Kospi climbed 0.8 percent to 2,731.90.

Samsung Heavy Industries jumped 8.4 percent after analysts said the profitability of shipbuilders will likely improve toward the end of the year. Hana Financial, KB Financial and Shinhan Financial surged 4-6 percent.

Australian markets rebounded, with mining, financial and property developers leading the surge. The benchmark S&P/ASX 200 Index rose 0.8 percent to 7,921.30, while the broader All Ordinaries Index advanced 0.7 percent to finish at 8,153.40.

Mineral Resources rallied 3.5 percent after announcing its FY production results. Pilbara Minerals climbed 3.8 percent. Bellevue Gold plunged 21.6 percent after completing a capital raising.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index dropped 0.4 percent to 12,349.47.

Europe

European stocks are broadly higher on Friday after strong U.S. GDP data boosted hopes of a soft landing for the world’s largest economy and paved the way for the Federal Reserve to cut interest rates soon.

Earlier this week, a former Fed hawk said waiting for September to cut rates “unnecessarily increases the risk” of recession.

While the German DAX Index has climbed by 0.5 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both up by 0.9 percent.

Italian oil major ENI has shown a strong move to the upside after its second quarter profit beat forecasts.

Ams OSRAM has also soared after the sensor maker’s quarterly net loss came in better than expected.

British lender NatWest has also jumped after lifting its full-year revenue forecast.

Defense and aerospace group Babcock International has also surged after reporting strong full-year results.

Hermes International has also rallied nearly in Paris. The Birkin-bag maker reported a 13 percent increase in second quarter sales, defying the luxury downturn.

Eyewear maker EssilorLuxottica has also spiked after reporting strong financial performance for the first half of 2024.

On the other hand, Capgemini shares have slumped. The IT consulting group expects its annual revenue to fall between 0.5 percent and 1.5 percent, compared with the earlier expectation of 0-3 percent rise.

German luxury automaker Mercedes-Ben has also moved lower in volatile trade after trimming its 2024 profit outlook for its core car division.

U.S. Economic Reports

Consumer prices in the U.S. crept up in line with economist estimates in the month of June, according to a highly anticipated report released by the Commerce Department on Friday.

The Commerce Department said its personal consumption expenditures (PCE) price index inched up by 0.1 percent in June after coming in unchanged in May. The uptick by the index matched expectations.

The report also said the annual rate of growth by the PCE price index slowed to 2.5 percent in June from 2.6 percent in May. The slowdown in year-over-year growth also met estimates.

Meanwhile, the Commerce Department said the core PCE price index, which excludes food and energy prices, rose by 0.2 percent in June after inching up by 0.1 percent in May. Economists had expected another 0.1 percent uptick.

The annual rate of growth by the core PCE price index was unchanged from the previous month at 2.6 percent in June, while economists had expected the pace of growth to slow to 2.5 percent.

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending.

The report showed personal income rose by less than expected, while personal spending increased in line with economist estimates.

At 10 am ET, the University of Michigan is scheduled to release its revised reading on consumer sentiment in the month of July.

The consumer sentiment index for July is expected to be unrevised from the preliminary reading of 66.0, which was down from 68.2 in June.