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

United States

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 rose 30.75 points, or 0.8%, to 4,086.50.
  • Dow Jones Industrial Average futures YM00 rose 119 points, or 0.4%
  • Nasdaq-100 futures NQ00 were up 149 points, or 1.2%, at 12,428.25.

On Thursday, the Dow industrials DJIA 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 rose 2% to 4,057.84 and the Nasdaq Composite COMP 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.

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 shares sank 20% after the big-box retailer swung to a surprise loss and sales miss. Stocks in Gap Inc. GPS tumbled 15% after the clothing retailer reported a wider-than-expected loss and disappointing forecast. Costco Wholesale Corp. COST 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.

“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?
  • Dell Technologies Inc. DELL stock rose 9% after the computer equipment maker reported higher first-quarter sales and lower operating expenses.
  • Baidu Inc.’s BIDU Hong Kong-listed shares HK:9888 surged 14% after the Chinese search engine’s first-quarter results beat expectations and as several analysts raised their stock-price targets. U.S.-listed shares rose 1%.
  • Marvell Technology Inc. shares  MRVL were up 3% after the semiconductor group reported solid earnings results and slightly-better-than expected guidance.
  • Ulta Beauty Inc. ULTA shares surged 8% in premarket trading after the beauty products retailer lifted its full-year sales and earnings guidance Thursday after better-than-expected first-quarter results. 
  • Shares of Workday Inc. WDAY fell 8% after the human resources cloud-software company on Thursday reported earnings that missed the Wall Street consensus and slightly raised its forecast.
How are other assets trading?
  • The yield on the 10-year Treasury note BX:TMUBMUSD10Y  fell 2 basis points to 2.726%. Yields and Treasury prices move opposite each other.
  • The ICE Dollar Index  DXY,  which measures the greenback against major currencies, was up 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  for June delivery rose 0.4% to $ 1,856.30 an ounce.
  • Bitcoin  BTCUSD was off 2.4% to $ 28,930.
  • In European equities, the Stoxx Europe 600  XX:SXXP  rose 0.8%, while London’s FTSE 100 UK:UKX gained 0.2%.
  • In Asia, the Shanghai Composite  CN:SHCOMP rose 0.2%, while Hong Kong’s Hang Seng Index  HK:HSI  rose 2.8% and Japan’s Nikkei 225 index  JP:NIK rose 0.6%.