The major U.S. index futures are signaling a slightly higher open today, following a significant drop over the last two sessions. This upward trend comes after the Commerce Department released a crucial report indicating that consumer prices in April increased as economists had predicted, while core consumer prices rose by less than expected.
The report revealed that the personal consumption expenditures (PCE) price index climbed 0.3 percent in April for the third consecutive month, matching forecasts. However, the core PCE price index, which excludes food and energy costs, increased by only 0.2 percent, below the anticipated 0.3 percent.
Both the annual growth rates of the PCE price index and core PCE price index remained steady at 2.7 percent and 2.8 percent, respectively, aligning with expectations. These inflation figures, preferred by the Federal Reserve, were part of the Commerce Department's personal income and spending report.
The lower-than-expected rise in core prices might foster renewed optimism regarding interest rates, though the unchanged annual figures could temper expectations for an imminent rate cut.
Following a mostly lower close on Wednesday, stocks declined further on Thursday. The major averages ended the day solidly in the red, with the Dow hitting its lowest closing level in nearly a month. The Nasdaq and S&P 500 dipped to new session lows late in the day but recovered some losses by the close.
The Dow fell by 330.06 points, or 0.9 percent, to 38,811.48, the Nasdaq dropped 183.50 points, or 1.1 percent, to 16,737.08, and the S&P 500 decreased by 31.47 points, or 0.6 percent, to 5,235.48.
Salesforce (CRM) was a significant drag on the Dow, plummeting 19.7 percent to its lowest closing level in over five months after reporting weaker than expected fiscal first-quarter revenues and providing disappointing guidance for the second quarter.
Concerns over interest rates further weighed on the markets ahead of the release of key inflation data on Friday.
On the economic front, the Labor Department reported a slight uptick in first-time claims for U.S. unemployment benefits for the week ended May 25th. Initial jobless claims rose to 219,000, up by 3,000 from the previous week's revised figure of 216,000, in line with economists' expectations of 218,000.
Additionally, the Commerce Department revised its gross domestic product growth for the first quarter to 1.3 percent, down from the previously reported 1.6 percent and in line with analysts' predictions. This contrasts with the 3.4 percent surge in GDP in the fourth quarter of 2023.
A separate report from the National Association of Realtors highlighted a significant drop in pending home sales in April.
Despite the broader market declines, telecom stocks surged, with the NYSE Arca North American Telecom Index jumping 2.9 percent. Housing stocks also showed strength, as evidenced by the 2.0 percent rise in the Philadelphia Housing Sector Index. Gold stocks performed well amid a slight increase in the price of the precious metal, with the NYSE Arca Gold Bugs Index climbing 1.6 percent.
There was also notable strength in commercial real estate, computer hardware, and transportation stocks. However, Salesforce led a decline in the software sector, resulting in a 4.8 percent drop in the Dow Jones U.S. Software Index.
Commodity and Currency Markets:
Crude oil futures are inching up by $0.07 to $77.98 a barrel after falling $1.32 to $77.91 a barrel on Thursday. Meanwhile, gold futures are rising by $3.30 to $2,369.80 an ounce, after a slight increase of $2.40 to $2,366.50 an ounce in the previous session.
In currency trading, the U.S. dollar is at 156.88 yen, slightly up from 156.82 yen at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0875, compared to $1.0832 the previous day.
Asia:
Asian markets had a mixed close on Friday despite a downward revision to U.S. first-quarter GDP data that revived hopes for Federal Reserve rate cuts later this year.### Regional Market Recap and Economic Highlights
#### Asia-Pacific
- **Regional Performance:** Market gains were limited following hawkish remarks from New York Fed President John Williams and the release of lackluster PMI data from China.
- **Currency Movement:** The dollar stabilized as markets anticipated upcoming inflation figures from the Eurozone and the U.S. ahead of next week's European Central Bank (ECB) meeting.
- **Commodity Overview:** Gold remained largely unchanged in Asian trading, while oil prices continued to decline in anticipation of an OPEC+ meeting set to discuss potential supply cuts.
- **China:** The Shanghai Composite Index dipped 0.2% to 3,086.81. Official surveys indicated a downturn in both manufacturing and non-manufacturing activity, affecting the growth outlook. The manufacturing PMI dropped from 50.4 to 49.5 in May, signaling a contraction after two months of growth. The non-manufacturing PMI marginally fell from 51.2 to 51.1.
- **Hong Kong:** The Hang Seng Index fell 0.8% to 18,079.61.
- **Japan:** Japanese markets saw a rally, with the Nikkei 225 Index surging 1.1% to 38,487.90. This was driven by a report from the Nikkei financial news outlet that Japan is planning to redirect nearly ¥100 trillion ($638 billion) in public funds towards active investing. The broader Topix Index increased by 1.7% to 2,772.49. The yen edged lower amidst data showing an unexpected decline in industrial output in April, with the jobless rate remaining unchanged. Inflation in Tokyo accelerated in May, supporting the Bank of Japan’s potential rate hike considerations.
- **South Korea:** The Kospi Index ended nearly flat, up by 1.08 points to 2,636.52, amid mixed economic data showing a rebound in industrial output but declines in retail sales and investment.
- **Australia:** Markets rebounded strongly, ending a three-day losing streak led by gains in banking, mining, and energy sectors. The S&P/ASX 200 Index rose 1.0% to 7,701.70, while the All Ordinaries Index climbed 1.0% to 7,970.80. Telix Pharmaceuticals jumped 15.3% to an all-time high following positive clinical trial results.
- **New Zealand:** The S&P/NZX 50 Index soared 2.7% to 11,867.29, its highest level since early May. This surge followed modest tax relief and reduced new spending in the government’s budget. Meridian Energy surged 10.5% after securing a long-term fixed-price power contract with New Zealand Aluminium Smelters.
#### Europe
- **Market Performance:** European stocks presented a mixed picture after data showed Eurozone inflation rose for the first time this year to 2.6% year-on-year in May, raising concerns about the ECB's interest rate adjustment pace.
- **Germany:** The DAX Index edged down by 0.1%.
- **France:** The CAC 40 Index was marginally lower.
- **United Kingdom:** The FTSE 100 Index increased by 0.6%, buoyed by data revealing a 0.4% month-on-month rise in house prices in May, which offset April’s 0.4% decline, according to the Nationwide Building Society. This led to the annual increase in house prices more than doubling to 1.3% from 0.6% in April.
- **Corporate News:**
- **STMicroelectronics N.V.:** The semiconductor giant’s stock dipped amid plans to build a new manufacturing facility in Catania, Italy, for mass production of 200mm silicon carbide (SiC) wafers.
- **Telecom Italia:** Shares declined as KKR received unconditional EU antitrust approval for acquiring the company’s fixed-line network.
- **JD Sports Fashion:** Shares plunged following a report of lower-than-expected full-year profits.
- **Flutter Entertainment:** The online betting firm’s shares slumped after announcing a new group CFO.
- **Renault:** The French automaker’s stock moved lower following a joint venture announcement with Geely for hybrid combustion engines.
- **Galliford Try Holdings:** The British construction group saw a sharp rise after securing two government contracts worth £101 million.
#### U.S. Economic Reports
- **Consumer Prices:** According to the Commerce Department, consumer prices in the U.S. increased as expected in April, while core consumer prices rose slightly below forecasts. The Personal Consumption Expenditures (PCE) price index rose by 0.3% for the third consecutive month in April, aligning with economist expectations. However, the core PCE price index, excluding food and energy, edged up 0.2% in April, following a 0.3% increase in March, against economists’ expectations of another 0.3% rise.
This professional summary provides a comprehensive review of the significant market events and economic data impacting global financial markets.The annual growth rates for both the PCE price index and the core PCE price index remained steady from the previous month at 2.7 percent and 2.8 percent, respectively. These figures aligned precisely with market expectations.
The inflation data, which is reportedly favored by the Federal Reserve, was part of the Commerce Department’s latest report on personal income and spending.
According to the report, personal income increased by 0.3 percent in April, following a 0.5 percent rise in March. This growth was consistent with economists' forecasts.
Simultaneously, the Commerce Department noted that personal spending inched up by 0.2 percent in April, after a more substantial 0.7 percent gain in March. Economists had predicted a 0.3 percent rise in spending.
At 9:45 AM ET, MNI Indicators is set to release its findings on Chicago-area business activity for May. The Chicago business barometer is anticipated to climb to 41.0 in May from 37.9 in April. However, a reading below 50 would still suggest a contraction.
Additionally, Atlanta Federal Reserve President Raphael Bostic is slated to deliver the commencement address at Augusta Technical College at 6:15 PM ET.
