Nasdaq, S&P 500 Futures Rise Ahead Of PPI Data: Analyst Flags Warning Signal That Could Pose Risk To Equity Market Rally

U.S. stocks may open Friday’s session on a mixed note as they aim to close a volatile week. The S&P 500’s record run highlights ongoing upward momentum despite mixed data. Key reports on producer price inflation and consumer sentiment, including inflation expectations, could shape sentiment. Earnings reactions have varied, potentially prompting a neutral response. With a stock market holiday on Monday, trading volume may decrease, following the typical pre-holiday trend.

Cues From Thursday’s Trading

In Thursday’s trading, major indices extended gains as weak January retail sales data fueled rate-cut speculation, lifting stocks. Jobless claims fell more than expected, and regional manufacturing activity for February surpassed expectations. However, import prices surged in January, and industrial production unexpectedly declined.

While the averages initially opened lower, both the Dow Industrials and the S&P 500 soon recovered, mostly staying above the unchanged line, with the latter setting a new record. The Nasdaq Composite moved decisively above the unchanged line by mid-session.

Except for IT stocks, all S&P 500 sector classes closed higher, led by gains in energy, real estate, financial, utility, and real estate sectors. Small-caps once again outperformed on Thursday.

US Index Performance On Thursday

The recent rise in bond yields could portend weakness for equity market, said an analyst.

“Rising Treasury yields have recently run into a key area of overhead resistance,” said LPL Chief Technical Strategist Adam Turnquist. “A breakout above the 4.35–4.40% range would not only be technically significant but also create headwinds for the broader equity market,” he said.

“If yields continue higher, defensive sectors and international equity markets could notice a deterioration in relative strength, and vice versa if yields pull back.”

Futures Today

Futures Performance On Friday

In premarket trading on Friday, the SPDR S&P 500 ETF Trust SPY rose 0.22% to $503.10 and the Invesco QQQ ETF QQQ gained 0.58% to $437.05, according to Benzinga Pro data.

Upcoming Economic Data:

The Labor Department is scheduled to release its producer price inflation report for January at 8:30 a.m. ET. Economists, on average, expect producer prices to rise 0.1% month-over-month and 0.6% year-over-year. In December, the inflation rates were at a negative 0.1% and a positive 1%, respectively.

The core monthly rate is expected at 0.1% compared to stable prices in December. The annual core rate may have eased from 1.8% to 1.6%.

The Commerce Department will release its housing starts report for January at 8:30 a.m. ET. Housing starts are expected to come in at a seasonally-adjusted annual rate of 1.45 million units in January, down from 1.46 million units in the previous month. Building permits, an indicator of future housing activity, may have increased from 1.493 million units to 1.509 million units.

Fed Vice Chair for Supervision Michael Barr is scheduled to speak at 9:10 a.m. ET.

The University of Michigan is due to release the results of its February preliminary consumer sentiment survey. The headline consumer sentiment index is expected at 80, a one-point improvement from January. Traders may also watch out for the inflation components of the report.

San Francisco Fed President Mary Daly will speak at 12:10 p.m. ET.

See also: Futures Vs. Options

Stocks In Focus:

• Roku, Inc. ROKU fell over 15.50% in premarket trading following the release of its quarterly results.
• Other stocks moving on earnings are Coinbase Global, Inc. COIN (up over 12%), Applied Materials, Inc. AMAT (up over 13%), DoorDash, Inc. DASH (down nearly 8%), DraftKings Inc. DKNG (down over 4%), Dropbox, Inc. DBX (down over 13%) and The Trade Desk, Inc. TTD (up over 18%).
• Cinemark Holdings, Inc. CNK, Barnes Group Inc. B, American Axle & Manufacturing Holdings, Inc. AXL, United States Cellular Corporation USM and Vulcan Materials Company VMC are among the notable companies reporting their earnings ahead of the market open.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures fell 1.03% to $77.23 in early European session on Friday after the commodity rebounded by about 1.8% on Thursday. The benchmark 10-year Treasury note edged up 0.02 percentage points at 4.26%.

Major Asian markets closed Thursday’s session mostly higher, except the Taiwanese market, which soared on Thursday after it reopened after the Lunar New Year holidays. Wall Street’s rebound generated optimism in the region’s markets.

European stocks also rallied and traded notably higher in late-morning trading.

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