US stock futures rose on Friday as a closely watched inflation gauge kept up momentum on cooling inflation and investors absorbed the fallout of the Biden-Trump debate.
S&P 500 futures (ES=F) advanced roughly 0.3% after the benchmark closed a step nearer to its record high. Contracts on the tech-heavy Nasdaq 100 (NQ=F) were also 0.4% higher, while Dow Jones Industrial Average futures (YM=F) hovered above the flatline.
The gauges are eyeing an upbeat end to a bumpy week that saw the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) come back from a three-day losing streak. While stocks are set to book a stellar first half as they head into the last trading day of June, those wobbles have fanned fears of a pullback in the rest of the year.
The last significant data point of that first half came in the latest reading of the Fed’s preferred inflation gauge, which Yahoo Finance’s Josh Schafer reported showed inflation eased in May as prices increased at their slowest pace since March 2021.
The core Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy and is closely watched by the Fed, rose 0.1 % in May from the prior month, in line with Wall Street’s expectations.
Meanwhile, with November’s US election high on the list of risks, investors took note of President Joe Biden’s weak showing in his first debate with presumptive Republican nominee Donald Trump. The former president’s promised tax cuts and trade clampdown are seen as likely to boost stocks. Shares in Trump Media & Technology Group (DJT) jumped in pre-market trading.
The market is also on alert for more signs that consumer resilience is losing steam, as key companies flag downbeat prospects for sales. Nike (NKE) stock sank almost 15% in pre-market trading, while Walgreens (WBA) shares stayed under pressure on the heels of Thursday’s 22% tumble.
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Fed’s preferred inflation gauge shows prices rose at slowest pace since March 2021
The latest reading of the Fed’s preferred inflation gauge showed inflation eased in May as prices increased at their slowest pace since March 2021.
The core Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy and is closely watched by the Federal Reserve, rose 0.1 % in May from the prior month, in line with Wall Street’s expectations and slower than the 0.3% increase seen in April.
Core PCE was up 2.6% over the prior year in May, in line with estimates and unchanged from the annual increase seen in the last two months. May’s reading marked the slowest annual gain in more than three years.
Trump Media on the move
After a shaky debate performance by President Joe Biden, shares of Trump Media & Technology (DJT) are on the move.
As of this writing, shares are up 7.5% in pre-market trading.
Equally as bad to watch (sort of … ) as last night’s debate is Nike’s (NKE) stock in the pre-market, down 14% as of this writing.
The company’s guidance was a real letdown, and concerns linger about its management’s execution around product innovation. To not see better guidance from Nike in an Olympic year is a red flag.
I liked Stifel analyst Jim Duffy’s take on the quarter:
“The FY25 guide (the 5th downward consensus revision in 6 quarters), pushes prospects for growth inflection further into 2025 (perhaps FY4Q or spring 2025 at the earliest) asking investors to both underwrite success of not yet proven styles and look across an uncertain consumer discretionary backdrop into 2HCY24 until momentum could build again into 2HCY25. Management credibility is severely challenged and potential for C-level regime change adds further uncertainty. An investor day in Nov. will likely outline a multi-year economic model with lower returns than the precedent adding risk to the premium enjoyed in the historical multiple. We remain appreciative of N scale advantage in a category with secular growth tailwinds and structural margin potential but, at the current valuation, can’t support a compelling upside case until growth inflection becomes more tangible.”
Duffy downgraded his rating on Nike to hold this morning.
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