U.S. stock index futures experienced a downturn on Friday as investors remained cautious ahead of a pivotal inflation report that could significantly influence expectations regarding the Federal Reserve’s upcoming interest rate cuts.
Scheduled for release at 8:30 a.m. ET, a report from the Commerce Department is anticipated to reveal that the Personal Consumption Expenditure (PCE) Index—the Fed’s favored measure of inflation—rose by 2.3% in August, a decrease from 2.5% the prior month. This trend indicates that price pressures are edging closer to the central bank’s target of 2%, providing the Fed with sufficient flexibility to initiate a rate easing cycle, which began last week with a 50 basis point cut. Moving forward, the Fed’s primary concern will be to avoid a spike in unemployment.
Strategists at ING Bank noted, “Given the recent shift in the Fed’s focus towards employment aspects of its mandate, even minor deviations in inflation data might not rattle the markets as much as before.” This sentiment reflects a more cautious approach amid mixed economic signals, as traders assess the likelihood of the Fed making further significant moves at its next meeting in November. According to the CME Group’s FedWatch Tool, the probability of another substantial rate cut sits at 51.4%, while the chances of a more modest 25 basis point cut are at 48.6%.
By 5:23 a.m. ET, Dow E-minis were down by 15 points (or 0.04%), with S&P 500 E-minis declining by 3.5 points (0.06%) and Nasdaq 100 E-minis off by 36.75 points (0.18%).
In addition to the inflation data, today’s economic calendar includes the final September estimate for consumer sentiment from the University of Michigan and comments from Federal Reserve Governor Michelle Bowman. Recently, Fed Governor Lisa Cook highlighted that the central bank’s unconventional decision earlier this month aims to mitigate “downside risks” to employment.
Wall Street concluded the previous trading session on a high note, with the S&P 500 reaching record levels after a positive forecast from Micron Technology ignited enthusiasm around artificial intelligence technologies. However, Micron’s stock fell by 0.6% during premarket trading following this uptick.
Overall, major indexes—including the S&P 500, Dow Jones, and Nasdaq—are on track to register their third consecutive week of gains. Notably, Bristol Myers Squibb soared 6.2% after the U.S. FDA granted approval for its schizophrenia treatment drug, offering a new option that alleviates symptoms with fewer common side effects. Conversely, Costco Wholesale’s shares slipped by 1.4% after the company reported fourth-quarter revenue that fell short of market forecasts, partly due to cautious consumer spending and lower gasoline prices.
In overseas markets, U.S.-listed shares of prominent Chinese companies like Alibaba jumped by 1.9%, while PDD Holdings gained 4.1% and Li Auto saw an increase of 2.3%. These movements reflect a positive response to China’s recent decision to cut interest rates and inject liquidity into its banking system as part of ongoing stimulus efforts.
Additionally, mining companies enjoyed a boost, with shares of Albemarle climbing by 3% and BHP up by 1%, following news that major cities in China, including Shanghai and Shenzhen, are planning to relax restrictions on home purchases, thereby encouraging potential buyers.
As investors stay alert for upcoming data and economic indicators, the story continues to evolve, influencing market strategies and economic forecasts alike.