Futures Turn Positive Following Closely Watched Inflation Data

The major U.S. index futures are currently pointing to a modestly higher open on Friday, with stocks likely to regain ground after moving notably lower over the two previous sessions.

The futures turned positive following the release of a highly anticipated Commerce Department report showing consumer prices in the U.S. increased in line with economist estimates in the month of April, while core consumer prices edged up by slightly less than expected.

The Commerce Department said its personal consumption expenditures (PCE) price index rose by 0.3 percent for the third straight month in April, matching economist estimates.

Meanwhile, the report said the core PCE price index, which excludes food and energy prices, crept up by 0.2 percent in April after rising by 0.3 percent in March. Economists had expected another 0.3 percent increase.

The annual rates of growth by the PCE price index and the core PCE price index were both unchanged from the previous month at 2.7 percent and 2.8 percent, respectively. The readings matched expectations.

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 smaller than expected monthly increase in core prices may lead to renewed optimism about the outlook for interest rates, although the unchanged annual readings are likely to temper hopes for a near-term rate cut.

After ending Wednesday’s session mostly lower, stock saw further downside during trading on Thursday. The major averages all finished the day firmly in negative territory, with the Dow once again falling to its lowest closing level in almost a month.

The Nasdaq and the S&P 500 fell to new lows for the session late in the day but regained some ground going into the close.

The Dow slid 330.06 points or 0.9 percent to 38,11.48, the Nasdaq slumped 183.50 points or 1.1 percent to 16,737.08 and the S&P 500 fell 31.47 points or 0.6 percent to 5,235.48.

A nosedive by shares of Salesforce (CRM) weighed on the Dow, with the cloud-based software company plunging by 19.7 percent to its lowest closing level in over five months.

Salesforce came under pressure after reporting weaker than expected fiscal first quarter revenues and providing disappointing fiscal second quarter guidance.

Concerns about the outlook for interest rates also continued to weigh on the markets ahead of the release of closely watched inflation data on Friday.

On the U.S. economic front, the Labor Department released a report showing first-time claims for U.S. unemployment benefits crept modestly higher in the week ended May 25th

The report said initial jobless claims rose to 219,000, an increase of 3,000 from the previous week’s revised level of 216,000. Economists had expected jobless claims to inch up to 218,000 from the 215,000 originally reported for the previous week.

Meanwhile, the Commerce Department said gross domestic product climbed by 1.3 percent in the first quarter compared to the previously reported 1.6 percent jump.

The downwardly revised increase, which was in line with economists, compares to the 3.4 percent surge in GDP in the fourth quarter of 2023.

A separate report released by the National Association of Realtors showed a sharp pullback by pending home sales in the U.S. in the month of April.

Despite the losses posted by the major averages, telecom stocks moved sharply higher on the day, resulting in a 2.9 percent spike by the NYSE Arca North American Telecom Index.

Significant strength was also visible among housing stocks, as reflected by the 2.0 percent jump by the Philadelphia Housing Sector Index.

Gold stocks also turned in a strong performance amid a slight increase by the price of the precious metal, with the NYSE Arca Gold Bugs Index climbing by 1.6 percent.

Commercial real estate, computer hardware and transportation stocks also saw notable strength on the day, while Salesforce led the software sector, resulting in a 4.8 percent plunge by the Dow Jones U.S. Software Index.

Commodity, Currency Markets

Crude oil futures are edging up $0.07 to $77.98 a barrel after tumbling $1.32 to $77.91 a barrel on Thursday. Meanwhile, after inching up $2.40 to $2,366.50 an ounce in the previous session, gold futures are rising $3.30 to $2,369.80 an ounce.

On the currency front, the U.S. dollar is trading at 156.88 yen versus the 156.82 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0875 compared to yesterday’s $1.0832.

Asia

Asian stocks ended on a mixed note Friday even as a downward revision to U.S. first quarter GDP data revived hopes for Fed rate cuts this year.

Regional gains were capped by hawkish comments by New York Fed President John Williams and the release of sluggish PMI data from China.

The dollar steadied before Eurozone and U.S. inflation numbers heading into next week’s ECB meeting.

Gold was little changed in Asian trading, while oil extended overnight losses ahead of an OPEC+ meeting to decide on supply cuts.

China’s Shanghai Composite Index slipped 0.2 percent to 3,086.81 after official surveys showed a weakening in Chinese factory and non-manufacturing activity in a surprise hit to the growth outlook.

The official manufacturing PMI fell from 50.4 to 49.5 in May, slipping into contraction after two months of expansion. The non-manufacturing PMI ticked down slightly from 51.2 to 51.1.

Hong Kong’s Hang Seng Index slid 0.8 percent to 18,079.61.

Japanese markets rallied and the yen edged lower after data showed Japanese industrial output unexpectedly fell in April and the nation’s jobless rate was unchanged.

Inflation in Tokyo accelerated in May, keeping the Bank of Japan largely on track to consider a rate hike in coming months.

The Nikkei 225 Index jumped 1.1 percent to 38,487.90 after the Nikkei financial news outlet reported that Japan is moving to steer nearly 100 trillion yen ($638 billion) more public money into active investing. The broader Topix Index surged 1.7 percent to 2,772.49.

Seoul stocks ended on a flat note, with the Kospi ending up 1.08 points at 2,636.52 after the release of mixed economic data.

South Korean industrial output rebounded in April following a sharp fall a month earlier, but retail sales and investment dropped for the second consecutive month, data showed.

Australian markets rose sharply to snap a three-day losing streak, with banks, mining and energy stocks leading the charge.

The benchmark S&P/ASX 200 Index rallied 1.0 percent to 7,701.70, while the broader All Ordinaries Index closed up 1.0 percent at 7,970.80.

Telix Pharmaceuticals spike 15.3 percent to a record high after announcing positive clinical trial data.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index soared 2.7 percent to 11,867.29, hitting the highest level since early May after the government delivered modest tax relief and lowered new spending in its budget.

Meridian Energy surged 10.5 percent after it agreed on a long-term fixed price power contract with New Zealand Aluminium Smelters.

Europe

European stocks are turning in a mixed performance on Friday after data showed Eurozone inflation rose for the first time this year, reaching 2.6 percent year-on-year in May and adding to worries about how slowly the European Central Bank will cut interest rates.

The German DAX Index is down by 0.1 percent and the French CAC 40 Index is marginally lower, while the U.K.’s FTSE 100 Index is up by 0.6 percent as data showed U.K. house prices increased in May after two consecutive decreases.

U.K. house prices gained 0.4 percent month-on-month in May, offsetting April’s 0.4 percent decrease, as the housing market showed signs of resilience amid ongoing affordability pressures, the Nationwide Building Society said.

As a result, the annual increase in house prices more than doubled to 1.3 percent from 0.6 percent in April.

In corporate news, semiconductor major STMicroelectronics N.V. has dipped as it announced a plan to build a new manufacturing facility in Catania, Italy for the mass production of 200mm silicon carbide or SiC wafers.

Telecom Italia has also declined as U.S. investment firm KKR received unconditional EU antitrust approval for its acquisition of the telecom company’s fixed-line network.

Sportswear retailer JD Sports Fashion has plunged after reporting lower-than-expected full-year profits, while online betting firm Flutter has also slumped as it named a new group CFO.

French automaker Renault has also moved to the downside after it announced a joint venture with Chinese partner Geely for hybrid combustion engines.

Meanwhile, British construction group Galliford Try Holdings has moved sharply higher after securing two government contracts worth £101 million.

U.S. Economic Reports

A highly anticipated report released by the Commerce Department on Friday showed consumer prices in the U.S. increased in line with economist estimates in the month of April, although core consumer prices edged up by slightly less than expected.

The Commerce Department said its personal consumption expenditures (PCE) price index rose by 0.3 percent for the third straight month in April, matching economist estimates.

Meanwhile, the report said the core PCE price index, which excludes food and energy prices, crept up by 0.2 percent in April after rising by 0.3 percent in March. Economists had expected another 0.3 percent increase.

The annual rates of growth by the PCE price index and the core PCE price index were both unchanged from the previous month at 2.7 percent and 2.8 percent, respectively. The readings matched expectations.

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 said personal income rose by 0.3 percent in April after climbing by 0.5 percent in March. The increase came in line with economist estimates.

At the same time, the Commerce Department said personal spending edged up by 0.2 percent in April after advancing by 0.7 percent in March. Economists had expected spending to rise by 0.3 percent.

At 9:45 am ET, MNI Indicators is due to release its report on Chicago-area business activity in the month of May. The Chicago business barometer is expected to rise to 41.0 in May from 37.9 in April, but a reading below 50 would still indicate contraction.

Atlanta Federal Reserve President Raphael Bostic is scheduled to deliver the commencement speech at Augusta Technical College at 6:15 pm ET.