After a mixed close on Thursday, stocks are set for a positive start on Friday, despite the Labor Day holiday likely keeping trading volume subdued. The index futures are showing solid gains early in the session, with the sentiment largely hinging on the inflation report scheduled for release before the market opens. The futures market has already priced in a 100% probability of a rate cut, with the only question mark being the size of the reduction. If Friday’s inflation data doesn’t force a reevaluation, the market could see a significant rally. A rebound in tech stocks could also provide a boost.
In premarket trading, the SPDR S&P 500 ETF Trust (SPY) is up 0.46% to $560.91, and the Invesco QQQ ETF (QQQ) is jumping 0.72% to $474.03, according to Benzinga Pro data.
Wall Street demonstrated resilience on Thursday, weathering the negative reaction to artificial intelligence giant Nvidia Corp.’s (NVDA) earnings release. Despite beating second-quarter estimates and issuing above-consensus guidance for the third quarter, Nvidia shares fell 6.38%. The market received an early boost from an upward revision to second-quarter GDP growth, with a string of positive earnings adding further momentum. Comerica Chief Economist Bill Adams commented on the GDP report, stating, “The GDP revisions show the U.S. economy was in good shape in mid-2024.” He added, “Solid growth of consumer spending propelled the economy forward in the second quarter, and the increase of consumer confidence in July suggests it will propel growth in the second half of the year as well.”
The tech-heavy Nasdaq Composite and the S&P 500 Index traded well above the flat line for most of the session before experiencing a sharp pullback in late trading. The Nasdaq ended slightly lower, while the S&P 500 closed almost unchanged with a slight negative bias. The Dow Jones Industrial Average opened higher but briefly dipped below the unchanged line in early trading. After recovering from the dip, the index remained in the green for the rest of the session, hitting a new intraday high and also closing at a fresh record. Among the sectors, energy, industrials, financials, materials, and utilities gained ground, while IT stocks suffered the most significant losses.
As investors brace for the first rate cut in over four years, a technical analyst has cautioned that the market may not experience smooth sailing in the near term. LPL Financial’s Chief Technical Strategist Adam Turnquist stated that Friday’s inflation report and next week’s jobs data could determine the size of the September rate cut. He added that another weak employment report could push the probability of a 0.50% reduction. “We believe a soft landing is still viable but not guaranteed, setting stocks up for a potential volatile fall, likely exacerbated by the November election,” Turnquist said. He noted that historically, stocks have traded flat to negative in the first few months after a rate-cutting cycle begins but tend to move higher over the following 12 months, with the drawdowns during these 12 months tending to be more severe.
The Bureau of Economic Analysis will release the July personal income and spending report at 8:30 a.m. EDT. The personal consumption expenditure reading of the report is expected to show a 2.5% year-over-year increase, unchanged from June. The annual rate of the core personal consumption expenditure – the Fed’s key inflation gauge, is expected to edge up from 2.6% to 2.7%. The headline numbers of the report, namely personal income and spending, may have seen month-over-month increases of 0.2% and 0.5%, respectively, compared to the June rates of 0.2% and 0.3%.
The ISM-Chicago will release the results of its regional manufacturing activity survey at 9:45 a.m. EDT. Economists are expecting the Chicago business barometer to come in at 45.6 in August, almost unchanged from July’s 45.3. The University of Michigan is scheduled to announce the results of its final consumer sentiment index for August at 10 a.m. EDT. Economists, on average, expect the index to be upwardly revised from the mid-month reading of 67.8 to 68, marking an increase from July’s 66.4. Traders may also focus on the survey’s one- and five-year inflation expectations readings.
Dell Technologies Inc. (DELL) saw its shares climb over 6% in premarket trading following the computer and peripheral maker’s earnings release. Other stocks moving on earnings include Autodesk, Inc. (ADSK) (up over 3%), Lululemon Athletica Inc. (LULU) (up nearly 4.5%), Marvell Technology, Inc. (MRVL) (up nearly 9%), MongoDB, Inc. (MDB) (up over 15%). Elastic N.V. (ESTC) is down over 27% and Ulta Beauty, Inc. (ULTA) is down nearly 6.50%. JinkoSolar Holding Co., Ltd. (JKS) is scheduled to announce its quarterly results before the market opens.
Crude oil and gold futures were modestly lower, and Bitcoin (BTC/USD) traded nearly flat under the $60K level. The yield on the 10-year Treasury note rose 1.1 basis points to 3.856%. Asian stocks rallied across the board on Friday, encouraged by Wall Street’s resilient performance. The European markets held up in early trading.
