Nasdaq futures extend gains ahead of inflation data

What’s driving markets

The final trading day of the week, month and quarter is presenting a mildly positive picture as investors await important inflation data.

The U.S. personal consumption expenditure report for May will be published at 8:30 a.m. Eastern, with economists forecasting annual core growth of 4.6%, down from 4.7% in April.

The PCE is among the Federal Reserve’s favored inflation gauges and so investors will want to see confirmation that price pressures continue to ease, allowing the central bank to soon stop its monetary tightening campaign.

However, recent data suggests the U.S. economy is humming along quite nicely and the Fed may need to persevere in its hawkish stance, analysts noted.

“[W]ith 10 year U.S. yields shooting higher on the back of a sharp drop in weekly jobless claims and an upward revision to 1Q23 GDP growth — stock pickers may still be concerned that the data points to a stronger economy than the Fed wants and likely puts more at stake on [the] PCE inflation report,” said Stephen Innes, managing partner at SPI Asset Management.

Still, for now investors seem confident that the market can absorb the prospects of bond yields staying higher for longer. The last time 10-year Treasuries
TMUBMUSD10Y,
3.883%
yielded around the current levels of 3.85%, the S&P 500 was more than 10% lower amid fallout from the regional banking crisis.

And the rise in rates has not prevented the tech-heavy Nasdaq Composite from extending its gains to 30% for the year, in line for its best first half since 1983.

Nike
NKE,
+0.30%
may be a drag after the sports fashion retailer, a component of the Dow industrials, delivered poorly-received results after the market closed Thursday, leaving its stock off 4% in premarket action.

Other U.S. economic updates set for release on Friday include personal income and spending for May, at 8:30 a.m., the Chicago Business Barometer for June at 9:45 a.m. and the final reading of June consumer sentiment at 10 a.m.