Wall Street is gearing up for a modestly lower opening on Friday, as investors brace themselves for the release of key inflation data. The data, due before the market opens, could have a significant impact on the direction of the market, which has been on an upward trajectory in recent months.
While a fairly benign inflation report could keep the bullish momentum going, a stronger-than-expected reading could trigger a sell-off. Moreover, election uncertainty and a softening global growth outlook are adding to the market’s cautious mood.
The focus will shift to the third-quarter earnings season in the latter half of October, with companies expected to begin reporting their financial results. This period could offer further insights into the health of the economy and the outlook for corporate profits.
In pre-market trading, the SPDR S&P 500 ETF Trust (SPY) edged up 0.03% to $572.46, while the Invesco QQQ ETF (QQQ) fell 0.08%, according to Benzinga Pro data.
Looking back at Thursday’s session:
US stocks closed higher on Thursday, buoyed by a mix of positive economic data, strong Chinese stimulus, and strong earnings from Micron Technology, Inc. (MU). However, a sharp decline in Super Micro Computer, Inc. (SMCI) shares, following a Department of Justice probe, tempered optimism towards the tech sector.The major indices opened sharply higher after separate reports showed jobless claims fell in the recent reporting week, durable goods orders remained flat (contrary to expectations of a decline), and the second-quarter GDP data was left unrevised at 3%. While the indices initially lost some of their early gains, they remained mostly above the unchanged line for the rest of the session before closing higher.
The S&P 500 set another record intraday and closing high, with nine of the 11 S&P 500 sector classes ending the day in the green. Material stocks advanced notably, while energy stocks experienced significant selling pressure.
Analyst insights:
LPL Chief Economist Jeffrey Roach anticipates a period of higher volatility in both bonds and equities during the current period of global uncertainty and softer growth outlook. “We expect volatility to remain elevated over the next few months, and believe a better entry point back into the longer-term bull market is likely,” Roach said.The economist explained that the long and variable lag of monetary policy can take time to filter down from Wall Street to Main Street. “Portfolio allocators should consider keeping a domestic bias during these periods of flux,” he added.
With just two trading sessions remaining in September, the S&P 500 is up about 17.2% for the month-to-date period. Carson Group Chief Investment Strategist Ryan Detrick highlighted a positive aspect of this trend. If the index finishes September in the green, it would mark gains for eight of the nine months of 2024. Looking back at history, this has occurred nine other times, and in those years, the index posted gains for the fourth quarter all nine times. The average gain during those periods was a decent 6.7%.
Economic data to watch:
The Bureau of Economic Analysis is scheduled to release a personal income and spending report for August at 8:30 a.m. EDT. Economists expect personal income and spending to have increased by 0.4% and 0.3% month-over-month, respectively, in August. This compares to the July rates of 0.3% and 0.5%, respectively. The price consumption expenditure index may have edged up 0.1% compared to July’s 0.2% increase. Annually, the rate of increase in the PCEI is expected to have slowed from 2.5% in July to 2.3% in August.Other key economic releases on Friday include the advanced trade balance report for August, advance wholesale and retail inventory data, and the University of Michigan’s final consumer sentiment index for September.
Stocks in focus:
BlackBerry Limited (BB) fell over 1.50% in premarket trading following the company’s earnings announcement, and Costco Wholesale Corporation (COST) was down about 1.30% on earnings. Bristol Myers Squibb Co. (BMY) shares rose over 6% after the FDA approved Cobenfy, an oral medication for the treatment of schizophrenia in adults.Commodities, bonds and global equity markets:
Crude oil futures are weaker once again, although more modestly than in the previous two sessions, and gold futures retreated modestly and traded just shy of the record. Bitcoin (BTC/USD) rallied over 3% over the past 24 hours and is fast approaching the next psychological resistance of $66K.The yield on the 10-year Treasury note remained almost flattish with a slight negative bias at 3.785%. In Asia, stocks in Hong Kong, Japan, and China rose strongly, and the Australian averages gained modestly, but major indices elsewhere settled mostly lower. China’s optimism continued to buoy sentiment in the mainland markets. The European markets advanced in early trading as traders digested inflation data from some key countries in the region and other data.
