Futures Mixed as Inflation Data in Focus, Nvidia Slips
Futures for the S&P 500 and the Dow slightly increased, while those tracking the Nasdaq stayed flat. This week, investors are paying close attention to a critical inflation report. This report, due on Friday, will reveal more about the future monetary policy. The report is expected to show a moderation in price pressures.
Why is This Important?
The Personal Consumption Expenditures (PCE) price index report is essential because it's the Federal Reserve's preferred measure of inflation. This means it helps the Federal Reserve decide whether to raise or lower interest rates.
Currently, market participants are predicting about two rate cuts this year. They're even thinking there's a 65% chance of a cut in September. However, the Federal Reserve has forecasted only one rate cut likely in December.
Bob Savage, head of markets strategy and insights at BNY Mellon, stated in a note:
"Recent PCE readings have not always conformed to expectations … the push of the U.S. data in the last two weeks has left the markets expecting 2 cuts while the Fed sees just one—this will be recalculated after the Friday report."
Nvidia and Semiconductor Stocks
Nvidia, an AI chip leader, slipped 1.7% in premarket trading after falling nearly 7% in the past two sessions. Other semiconductor stocks also dropped. For instance, Arm Holdings and Advanced Micro Devices were down 2.1% and 0.4%, respectively.
Investors are also awaiting comments from Mary Daly, a member of this year's Federal Reserve voting committee. Her remarks are significant because many Fed policymakers believe in maintaining higher-for-longer interest rates.
Market Performance
The S&P 500 showed its third consecutive weekly gain, and the Dow Jones posted its strongest weekly performance in six weeks. Last week, there was a simultaneous expiration of stock and index derivative contracts, quarterly S&P 500 rebalancing, mixed economic data, and Nvidia briefly became the world’s most valuable firm.
Upcoming Events
For the rest of the week, investors are eyeing:
- Durable goods orders
- Weekly jobless claims
- Final first-quarter GDP figures
- Quarterly earnings reports from big companies like FedEx, Carnival Corp, Micron Technology, and Walgreens Boots Alliance.
Key Pre-Market Movements
As of 7:21 a.m. ET:
- Dow futures were up 107 points (0.27%).
- S&P 500 futures were up 6.5 points (0.12%).
- Nasdaq 100 futures were down 2.75 points (0.01%).
Some notable premarket movers included:
- Under Armour dropped 2.3% after agreeing to pay $434 million to settle a 2017 class action lawsuit accusing it of defrauding shareholders about its revenue growth.
- ResMed, a respiratory device maker, fell by 12.0% after Eli Lilly announced its weight-loss drug Zepbound resolved moderate-to-severe obstructive sleep apnea in up to 52% of patients in two trials.
- Affirm Holdings rose 3.3% following a "buy" rating from Goldman Sachs.
Understanding the Terminology
Futures: Think of this as a contract to buy or sell something (like stocks) at a future date. For example, if you think the price of apples will go up next month, you might agree to buy a lot of apples at today’s price.
Inflation: This is when prices go up for goods and services over time. Imagine if bread cost $2 last year but now costs $2.50—that’s inflation.
Monetary policy: These are the actions taken by central banks (like the Federal Reserve) to control the economy, mainly by setting interest rates.
Interest rates: This is the cost of borrowing money. For example, if you borrow $100 at a 5% interest rate, you’ll pay back $105.
By keeping these points in mind, you can better understand the movements in the financial market and how they impact the broader economy.
