(Reuters) – U.S. stock index futures fell on Friday ahead of a major inflation report that will test investor optimism about the size and pace of Federal Reserve rate cuts this year.
Wall Street paused this week after a recent rally, with the benchmark S&P 500 index and the tech-heavy Nasdaq on track for their first weekly losses in six weeks. A spike in government bond yields put pressure on riskier assets after a weak debt auction and continued concerns about persistent inflation.
Policymakers have also shown no urgency to lower borrowing costs as they continue to insist on a decline in inflation this year even as the labor market remains strong.
However, Thursday’s revision to first-quarter economic growth on softer consumption allayed some fears as bond yields fell and expectations for a September rate cut rose to above 50%. According to CME’s FedWatch tool, odds remained below these levels all week.
All eyes will now be on key April personal consumption expenditure data, the central bank’s favorite inflation gauge, due at 8:30 a.m. ET. The index is expected to remain unchanged from the previous month at 2.8% annualized.
“Where the actual release ends up will determine whether we enter a new chapter for the Fed’s disinflation story, or whether the country remains trapped in the rubble of persistent inflation,” Chris Turner, global head of markets at ING, said in a note .
Later in the day, comments will also be heard from Atlanta President Raphael Bostic, a voting member of the Federal Open Market Committee.
Technology stocks including Microsoft, Nvidia and ServiceNow were little changed in premarket trading after the sector posted its worst day in more than a month in the previous session following bleak expectations for Salesforce’s second quarter. The company’s shares rose 0.4%.
At 5:52 a.m. ET, the Dow e-minis were down 29 points, or 0.08%, the S&P 500 e-minis were down 10.5 points, or 0.20%, and the Nasdaq 100 e-minis were down 62.25 points, or 0. 34%.
Among the major players, Dell forecast current quarter earnings to be below market estimates and indicated that higher costs to build servers that can handle heavy AI workloads would eat into annual margins, sending the stock down by more than 14% would fall.
Zscaler rose 17% after the security solutions provider forecast fourth-quarter results above expectations, while Marvell Technology fell 4.6% after the chipmaker missed Street expectations for first-quarter revenue, hit by weak customer spending in its wireless carrier and enterprise markets.
Gap rose 23% after the apparel maker raised its annual sales forecast and first-quarter results beat market expectations, boosted by the strength of its Old Navy and Gap brands as Americans bought their trendy denims and limited-edition apparel.
Trump Media & Technology Group fell 4.3% after a New York jury convicted former President Donald Trump of falsifying documents to cover up a payment to silence a porn star ahead of the 2016 election.
(Reporting by Johann M Cherian and Lisa Pauline Mattackal in Bengaluru; Editing by Pooja Desai)
