By Johann M Cherian and Purvi Agarwal
(Reuters) -U.S. stock index futures edged up on Friday ahead of a crucial inflation report that could influence investor expectations about the extent of the central bank’s interest-rate cuts this year.
Global markets are nearing the end of a tumultuous month for riskier assets, after signs of a sudden moderation in the labor market sparked fears of a quicker-than-expected slowdown in the world’s largest economy in early August. The influence of the Japanese yen carry trade worsened the rout.
Risk-taking has improved since then, with the Dow at a record high and on track for monthly gains as subsequent data, including Thursday’s upward revision to economic growth, soothed nervous investors.
“With all that data in hand, the general perception is that the (U.S.) economy is doing better than thought, and that a larger 50 basis point cut from the Fed is now less likely,” Deutsche Bank analysts said in a note.
Focus now shifts to the Personal Consumption Expenditure data, the Fed’s preferred inflation gauge, due at 8:30 a.m. ET.
This will be the last PCE report before the Federal Reserve’s highly anticipated September meeting. Economists polled by Reuters forecast a marginal rise in inflation to 2.6% in July on an annual basis, from the previous month’s 2.5%.
Following Fed Chair Jerome Powell’s support last week for imminent policy adjustment, optimism around an interest-rate cut in September remains strong. Odds of a 25-basis-point reduction are at 65.5%, while those of a 50-bps reduction are at 34.5%, according to the CME Group’s FedWatch Tool.
At 07:08 a.m., Dow E-minis were up 89 points, or 0.21%, S&P 500 E-minis were up 23.75 points, or 0.42%, Nasdaq 100 E-minis were up 138.5 points, or 0.71%.
The tech-focused Nasdaq and the S&P 500 closed lower in the previous session after Nvidia failed to match investors’ sky-high expectations despite upbeat results and a broadly in-line forecast. The AI-chip bellwether was up 1.3% in premarket trading after a 6.4% drop in the previous session.
The benchmark S&P 500 is close to an all-time high, poised for a monthly gain of 1.2%, while the Nasdaq is down 0.47% in August.
Rate-sensitive megacaps such as Alphabet and Microsoft added 0.8% each, while Tesla rose more than 1%, supported by a dip in Treasury yields.
Among others, Marvell Technology forecast third-quarter results above Street estimates, sending the chipmaker’s shares up 10.8%.
Dell Technologies advanced 5.7% after lifting its annual revenue and profit forecasts, buoyed by demand for its AI-optimized servers.
Lululemon Athletica gained 4% after posting a beat on second-quarter profit, while Ulta Beauty slid 8.4% after it trimmed its annual results forecasts due to slowing demand.
Investors will also parse the University of Michigan’s final reading on consumer sentiment for the month of August later in the day.
Trading volumes are expected to thin ahead of the extended weekend due to the Labor Day holiday.
(Reporting by Johann M Cherian and Purvi Agarwal in Bengaluru; Editing by Pooja Desai)
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