U.S. Stock Futures Rise on Positive Earnings Reports and Inflation Data Focus

U.S. Stock Futures Rise on Positive Earnings Reports and Inflation Data

Investors woke up to a positive start on Friday as U.S. stock futures climbed following strong earnings reports from tech giants Alphabet and Microsoft. The optimism was also fueled by anticipation for key inflation data set to be released later in the day.

Futures on the S&P 500 were up 0.7% in early trading, Nasdaq 100 futures surged 0.9%, and Dow Jones Industrial Average futures edged 0.1% higher. This turnaround comes after all three major stock indexes fell on Thursday due to disappointing U.S. gross domestic product data that revealed a spike in core inflation in the first quarter.

The probability of a rate cut by September, which was previously at 70%, fell to 59% early Friday according to CME’s FedWatch tool. Investors are now eagerly awaiting the release of the core personal consumption expenditures (PCE) index, the Federal Reserve’s preferred metric for inflation.

Despite the setback on Thursday, the tech sector is expected to shine on Friday thanks to strong earnings reports from Microsoft and Alphabet. Alphabet’s stock soared 11% in after-hours trading, boosting the broader tech sector and driving the outperformance of Nasdaq 100 futures.

However, the focus remains on the core PCE reading, with economists predicting a 2.7% year-over-year increase in March. The recent GDP data showed a higher-than-expected rise in core PCE in the first quarter, raising concerns about inflation momentum.

Deutsche Bank strategist Jim Reid commented, “Whichever way you crunch the numbers, this clearly isn’t the sort of inflation momentum where the Fed could be comfortable about cutting rates.” Bond yields fell in early trading after hitting 2024 highs on Thursday, with the yield on the 10-year Treasury note declining 2 basis points to 4.686%.

As investors navigate through the earnings season and inflation data, the market is poised for a volatile end to the week as they await further clues on the direction of interest rates and inflation.