Nasdaq 100, Dow Jones, S&P 500 News: Directionless as Wall Street Awaits Inflation Data for Fed Rate Clues

Stocks Hold Steady Ahead of Key Inflation Report

The major U.S. stock indexes are slightly higher shortly after the opening on Thursday as Wall Street anticipates new inflation data to provide insights on potential Federal Reserve interest rate cuts. The focus is on May’s core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation measure.

At 15:19 GMT, the Dow Jones Industrial Average is trading 39186.01, up 58.21 or +0.15%. The S&P 500 Index is at 5477.94, up 0.04 or +0.00% and the Nasdaq 100 Index is trading 17829.95, up 24.80 or +0.14%.

Market Eyes Inflation Data

Economists surveyed by Dow Jones predict a 0.1% month-over-month rise and a 2.6% increase year-over-year in core PCE. Traders hope this report will signal easing inflationary pressures, potentially prompting the Fed to reduce interest rates later this year. A disappointing PCE could lead to stagflation concerns, while meeting or surpassing expectations could set a positive tone for July, a historically strong month for markets.

Artificial Intelligence and Market Sustainability

Investors are also assessing the sustainability of the artificial intelligence (AI) trade. There is speculation on whether AI will continue to drive the market or if the rally needs to expand to other sectors. CNBC Pro strategists expect the S&P 500 to end the year barely higher than current levels. A recalibration may be needed for an overbought market dominated by a few mega-cap stocks, potentially leading to volatility but also creating opportunities in undervalued sectors.

Earnings Disappointments Impact Stocks

Several notable stocks declined after earnings reports. Micron fell over 5% following revenue guidance aligned with expectations. Levi Strauss dropped 15% due to disappointing quarterly revenue, and Walgreens Boots Alliance plummeted 21.1% after lowering its full-year outlook and reporting weaker-than-expected earnings.

Hims & Hers Faces Scrutiny

Telehealth platform Hims & Hers Health saw an 8% drop after a report by Hunterbrook Media raised concerns about the company’s weight loss drug sales. The stock has surged over 142% year-to-date, driven by high demand for anti-obesity drugs like Novo Nordisk’s Wegovy and Eli Lilly’s Mounjaro, despite ongoing lawsuits over knock-off versions of these medications.

Cybersecurity ETF Outperforms

The Global X Cybersecurity ETF climbed 3%, marking its best day since November. BlackBerry led gains with a 14% jump, followed by Telos Corp and SentinelOne, which increased over 8% and 6%, respectively. Palo Alto Networks rose 5%, and Zscaler and Varonis Systems saw over 4% gains.

Mixed Economic Data Released

Economic data released Thursday showed mixed results. The Commerce Department’s final Q1 GDP estimate showed a 1.4% annualized gain, slightly above the previous estimate. Inflation for the period, measured by the PCE price index, increased marginally. Initial jobless claims fell to 233,000, below estimates, while new durable goods orders unexpectedly rose 0.1% in May, beating expectations of a decline.

Market Forecast

Given the current data, the market outlook remains cautious. The anticipated PCE report will likely dictate short-term movements. A positive inflation reading could bolster a bullish sentiment for July, traditionally a strong month for stocks. Conversely, disappointing data may lead to increased volatility and sector rotations. Traders should stay alert for potential buying opportunities in undervalued sectors amidst this recalibration phase.

Technical Analysis

E-mini Nasdaq 100 Index futures are edging up on Thursday after recovering from an early session decline. The trend is up, but the index has been showing signs of topping out since forming a closing price reversal top on June 20.

The short-term range is 20371.00 to 19726.00. Its pivot at 20048.50 is resistance. The speculative bears are selling into this level. Bullish trend traders are trying to overtake it.

Trader reaction to the pivot will determine the direction of the market into the close.