Dow Jones and Nasdaq Index: Futures Rise with Key Inflation Data on the Horizon

Market Awaits Key Inflation Data as Tech Stocks Falter

Futures markets signaled a positive open on Friday, with Dow futures up over 200 points. Investors eagerly anticipate the release of the Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge.

At 12:04 GMT, Dow Futures are trading 40460.00, up 268.00 or +0.67%. S&P 500 Index Futures are at 5486.75, up 45.50 or +0.84% and Nasdaq Futures are trading 19209.50, up 217.25 or +1.14%.

Inflation Expectations

Economists polled by Dow Jones expect June’s headline PCE to show a 0.1% monthly increase and a 2.5% year-over-year rise. This data, due at 12:30 GMT, comes at the end of a volatile trading week.

Weekly Market Performance

The major indices are poised for weekly losses. The S&P 500 has declined 1.9%, while the Nasdaq has dropped 3.1%. The Dow Jones Industrial Average has fared slightly better, down 0.9% for the week.

Sector Rotation

Investors appear to be rotating into small caps and cyclical sectors. The communication services sector is on track for its worst week since October 2023, down 4.63%. Tech giants like Alphabet and Meta Platforms have seen significant declines.

Earnings Highlights

Earnings reports continue to impact individual stocks. Dexcom plunged 38% after disappointing guidance, while Deckers Outdoor surged 10% on strong quarterly results. Boston Beer Company slid 5% after missing earnings estimates.

Tech Sector Weakness

The information technology sector has declined 3.5% this week. Notable losses include CrowdStrike’s 16.7% drop and Nvidia’s 4.8% fall. This weakness in heavyweight names has posed challenges for the broader market.

Defensive Sectors Outperform

Health care and utilities sectors have bucked the trend, showing positive performance for the week. These traditionally defensive sectors are up 0.77% and 0.48%, respectively.

Market Forecast

The short-term outlook appears cautiously bullish, with futures pointing higher. However, investors should remain vigilant given the recent volatility and sector rotations. The PCE data release could significantly impact market direction, potentially influencing the Federal Reserve’s future policy decisions.

Technical Analysis

E-mini S&P 500 Index futures are currently straddling a crucial 50% level at 5463.25, which should set the tone on Friday.

A sustained move over 5463.25 will indicate the presence of buyers. Overtaking the 50-day moving average at 5502.63 will indicate the buying is getting stronger.

A sustained move under 5463.25 will signal the presence of sellers. The first target is this week’s low at 5432.50. This is a potential trigger point for an acceleration to the downside with the May 31 main bottom at 5205.50 the initial target price.