Stock Futures Fall as Inflation Fears Simmer
U.S. stock futures slipped on Thursday, with tech names lagging after a recent outperformance as investors looked ahead to key inflation data due at the end of the week and awaited the first U.S. presidential debate.
Futures for the Dow Jones Industrial Average retreated 70 points, or 0.2%, after the index eked out a 15-point gain on Wednesday to close at 39,127. S&P 500 futures lost 0.2% with contracts tracking the tech-heavy Nasdaq down 0.3%. The yield on the benchmark 10-year U.S. Treasury note ticked above 4.34%.
“Markets have struggled over the last 24 hours, with sovereign bonds selling off and equities losing ground for the most part,” said Henry Allen, an analyst at Deutsche Bank. “To be fair, it wasn’t all bad news, and a renewed tech advance did see the Magnificent 7 reach a new all-time high.”
In the spotlight are data due Friday in the form of the personal-consumption expenditures (PCE) price index, which is the Federal Reserve’s preferred measure of inflation. The outlook for inflation and the Fed’s interest-rate policy remains a dominant narrative for markets, with traders still pricing in a rate cut by December, though some Fed officials have poured cold water on the prospect of a rate cut this year.
Friday’s PCE release may be key in shifting the needle on rate expectations, which have already taken a wobble this week following unnerving data out of Australia. That country’s consumer-price index (CPI) spiked, raising the prospect of another rate hike.
“The upside surprise in Australia’s CPI on Wednesday morning meant investors started to dial back the chance of rate cuts over the coming months,” said Allen. “There’s multiple risks that investors are thinking about right now, which is making it difficult for markets to gain momentum.”
More immediately, investors will monitor weekly jobless claims out of the U.S. alongside durable goods orders and pending home sales for May. The evening will usher in the first presidential debate between Donald Trump and Joe Biden, which is likely to raise questions about the economy.