U.S. stocks set to open higher despite hot inflation read as technology sector marches higher

What’s driving markets

U.S. stocks looked set to open modestly higher on Friday even after a reading on the Federal Reserve’s preferred inflation gauge showed prices rose by more than economists had expected last month, causing equity futures to pare some of their gains from earlier in the session.

The PCE price index showed core inflation rose 0.4% in April, more than the 0.3% increase that economists had expected. Core inflation strips out volatile food and energy prices. The yearly increase in prices rose to 4.4% from 4.2% in the prior month.

Consumer spending jumped 0.8% in April — the biggest increase in three months — as Americans bought more new cars and drugs and increased outlays on services.

Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said inflation appeared to be moving “in the wrong direction” at the start of the second quarter.

A day earlier, a surge in technology stocks driven by Nvidia’s
NVDA,
+0.10%
optimistic, artificial intelligence-fueled outlook for sales in the second quarter had helped boost the Nasdaq and S&P 500. Nvidia’s shares also rose more than 24%, with the company adding nearly $200 billion to its market capitalization, one of the biggest one-day increases in the history of corporate America.

On Friday, another microchip maker, Marvell Technology
MRVL,
+26.28%,
was rising in premarket trade after saying AI has emerged as a key growth driver.

But beyond the AI frenzy, concerns lingered that the U.S. would not agree to raise the debt ceiling, though reports indicate progress in talks between President Joe Biden and House Speaker Kevin McCarthy. House Republicans have already left Washington ahead of the holiday weekend.

While Treasury Secretary Janet Yellen says the U.S. could run out of money as early as June 1, other projections estimate the federal government may have until the middle of the month.

“I think we’ll all be able to exhale by mid-June, although it will likely be an increasingly volatile market environment between now and then,” said Kristina Hooper, chief global market strategist at Invesco. “Once that drama recedes, I think all eyes will be back on central banks.”

Companies in focus

• Marvell Technology Inc.’s stock
  MRVL,
  +26.28%
  was powering 14% higher in premarket action after the chip company said it expected revenue from artificial intelligence to at least double this fiscal year.

• Gap Inc. shares
  GPS,
  +11.54%
  rallied 12% after the retailer took Wall Street by surprise and posted an adjusted profit of a penny a share.

• Ford Motor Co. shares
  F,
  +3.59%
   rose 1% after announcing that its electric-vehicle owners soon will have access to the more than 12,000 Tesla Inc. 
  TSLA,
  +2.79%
  Superchargers in the U.S. and Canada starting next year.

• Workday Inc. shares
  WDAY,
  +8.37%
  jumped 8% and headed toward their highest prices in more than a year, after the software company easily topped earnings expectations and brought on a new chief financial officer.