U.S. stock futures eased back from near 10-month highs ahead of next week’s inflation data and Fed decision.
How are stock-index futures trading
-
S&P 500 futures
ES00,
-0.06%
dipped 9 points, or 0.2% to 4289 -
Dow Jones Industrial Average futures
YM00,
-0.15%
fell 80 points, or 0.2% to 34079 -
Nasdaq 100 futures
NQ00,
+0.01%
eased 20 points, or 0.1% to 14659
On Thursday, the Dow Jones Industrial Average
DJIA,
rose 169 points, or 0.5%, to 33834, the S&P 500
SPX,
increased 26 points, or 0.62%, to 4294, and the Nasdaq Composite
COMP,
gained 134 points, or 1.02%, to 13239.
What’s driving markets
Futures suggest Wall Street is struggling to consolidate near its highest close for nearly 10 months as traders warily eye next week’s inflation data and Federal Reserve interest rate decision.
The S&P 500 closed Thursday at its best level since mid-August 2022, taking it into bull market territory having gained 20% from last October’s trough.
The stock barometer’s latest gains were supported by bigger than expected unemployment claims, which increased investor predictions that the Fed will leave its cost of borrowing at a range of 5% to 5.25% after its policy meeting concludes on Wednesday.
“Weekly data can be choppy, especially as the week included the Memorial Day holiday, but is getting relevance as it comes just ahead of the FOMC meeting next week. The read would likely be that labor market is cooling even as it is still quite tight,” said strategists at Saxo Bank.
The Fed’s decision is likely to be colored by the May consumer price index report, due Tuesday. Traders should thus be cheered if CPI inflation continues to decline from the current 4.9%, further encouraging a Fed rate-hike pause.
However, news on Friday from the world’s second biggest economy showed how concerns can grow when disinflation turns to deflation.
Data showed prices from China’s producers fell 4.6% in the year to May, the fastest decline in seven years, suggesting not just cheaper input costs, but also waning demand in the country that tends to be the engine of global growth.
With China’s annual consumer price inflation coming in at a meek 0.2% also, investors assumed that the data would encourage Beijing to deliver some fresh stimulus, in addition to an already announced drive to boost car sales.
Such intervention, realized and mooted, has prevented on Friday a sell-off in growth-sensitive assets like equities, oil and copper.
Meanwhile, market strategists were warily watching for indicators that investors had become too relaxed and thus stocks were vulnerable to a pull back.
The CBOE VIX
VIX,
a gauge of expected S&P 500 volatility, sits below 14, its lowest since early 2020, while traders have been eschewing the protection provided by put options.
But Mark Newton, head of technical strategy at Fundstrat was sanguine: “While the VIX is getting stretched to the downside, and short-term ratios of Equity Put/call have plummeted to near levels which argue for minor pullback, price action has not suggested such a move is upon us.”
Calls are options contracts, often used for bullish bets, that give holders the right, but not the obligation, to buy the underlying security at a set price by a certain time. Puts, options contracts used for more bearish bets, give the holder the right, but not the obligation, to sell.
“Overall, a rally in SPX [S&P 500] back up to 4325 and QQQ [a proxy for the Nasdaq 100] to 360 looks likely before any stalling out, no matter how minor,” he added.
There are no notable U.S. economic updates set for release on Friday.
