US Stock Futures Rebound Despite Weekly Losses from Inflation Fears

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US Stock Futures Rebound Despite Weekly Losses from Inflation Fears

Team FS

24/May/2024

Key Points:

Stock Futures Edge Higher: US stock index futures rise slightly on Friday, recovering from Thursday’s significant losses driven by inflation concerns.
Fed Signals Impact Market: The Federal Reserve's concerns over persistent inflation and potential delays in rate cuts led to a sharp drop in major indices.
Tech Sector in Focus: Despite overall losses, Nvidia’s strong earnings report boosts tech stocks, while other companies like Intuit and Tesla face challenges.

On Friday, US stock index futures made a modest recovery after the previous session saw significant losses due to concerns over persistent inflation and high interest rates. By 06:25 ET (10:25 GMT), Dow Jones Futures rose by 68 points (0.2%), S&P 500 Futures increased by 15 points (0.3%), and Nasdaq 100 Futures gained 50 points (0.3%).

Market Recap:

Thursday's Sharp Decline: The main Wall Street indices closed lower on Thursday. The S&P 500 fell by 0.7%, the Nasdaq Composite dropped by 0.4%, and the Dow Jones Industrial Average plummeted by 1.5%, marking its worst session in over a year. This downturn was driven by signals from the Federal Reserve indicating increasing concerns about sticky inflation, which are likely to delay any rate cuts this year.

Factors Influencing the Market:

1. Federal Reserve's Inflation Concerns: The minutes from the Fed’s late-April meeting, combined with hawkish comments from several Fed officials, revealed that the central bank is seeing slower progress towards its 2% annual inflation target. This has led traders to largely price out the possibility of rate cuts in the near future. The CME Fedwatch tool indicated a nearly equal probability (around 46%) that the Fed will either hold or cut rates in September.

2. Profit-Taking at Record Highs: Earlier this week, all three major indices hit record highs, making them susceptible to profit-taking. This profit-taking, combined with inflation fears, contributed to the sharp declines observed on Thursday.

Economic Data and Market Sentiment:

Friday’s economic data includes April’s durable goods report and May’s University of Michigan consumer sentiment index, both of which are closely watched indicators of economic health and consumer confidence.

Tech Sector Dynamics:

Despite the overall market downturn, the tech sector remained a focal point due to strong performance from Nvidia. The company’s impressive first-quarter earnings report sent its shares to record highs, initially boosting broader technology stocks on hopes that demand for artificial intelligence will support the sector. However, these gains were tempered by concerns about prolonged high US interest rates following hawkish signals from the Federal Reserve.

Notable Movements:

Nvidia (NASDAQ:NVDA): Nvidia’s surge helped mitigate overall losses in benchmark stock indices, demonstrating the significant influence of this tech giant, which is now the third-largest company on Wall Street.
Intuit (NASDAQ:INTU): Intuit’s shares traded lower premarket due to soft guidance for the current quarter, with investors concerned about a decline in free users of its TurboTax tax-preparation service.
Tesla (NASDAQ:TSLA): Tesla remained in the spotlight after data showed a reduction in the output of its Model Y electric car by a double-digit percentage at its Shanghai plant since March.

Crude Oil Prices:

Crude prices dipped lower on Friday, heading for substantial weekly losses amid concerns over US economic activity in the face of sticky inflation and high interest rates. By 06:25 ET, US crude futures (WTI) were down 0.8% at $76.23 per barrel, while Brent crude dropped 0.8% to $80.75 per barrel. Both contracts were on track to post weekly losses of over 3%, with Brent at its weakest level in two months and WTI at a three-month low.

Conclusion:

In summary, while US stock futures edged higher on Friday, recovering slightly from Thursday’s sharp losses, the market remains under pressure from persistent inflation concerns and the potential delay of rate cuts by the Federal Reserve. The tech sector, particularly Nvidia, provided some relief amid the broader market downturn. Investors are closely watching upcoming economic data and corporate earnings reports to gauge the market’s next moves. As always, staying informed and adopting a balanced investment approach is crucial during such volatile times.

Also Read : Indian Stock Markets End Flat Despite Record Highs Amid Global Uncertainty

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US Stock Futures Rebound Despite Weekly Losses from Inflation Fears

Market Recap:

Factors Influencing the Market:

Economic Data and Market Sentiment:

Tech Sector Dynamics:

Crude Oil Prices:

Conclusion:

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