Wall Street Futures Ride High On Microsoft, Alphabet Cheer, But Will Inflation Data Burst The Bubble? Why This Analyst Thinks Bull Run Isn't Over Yet

Tech earnings could come to the market’s rescue as traders remain jittery about the outcome of key inflation data due on Friday. AI giants Alphabet, Inc. GOOGL GOOG and Microsoft Corp. MSFT set a positive tone for tech companies with strong performances in the first quarter.

However, the focus will likely shift to the annual inflation rate, as measured by the Personal Consumption Expenditures Price Index (PCE), the Federal Reserve’s preferred gauge. This data, released as part of the personal income and spending report at 8:30 am ET, could provide a double boost to the market. A reading in line with or below expectations could help break the recent lackluster performance.

The PCE data is particularly important because the Federal Open Market Committee (FOMC), the Fed’s policy-setting arm, meets next Wednesday. The futures market currently prices in a 97% chance of the Fed holding rates steady.

Futures Performance On Friday ( as of 6:15 a.m. EDT)

Futures	Performance (+/-)
Nasdaq 100	+0.99%
S&P 500	+0.70%
Dow	+0.15%
R2K	-0.26%

Cues From Past Session:

A mixed first-quarter GDP data that showed weaker growth and a rise in an inflation gauge as well as negative reactions to tech earnings sent traders on the defensive on Thursday. The major averages opened notably lower but they trimmed their losses in the session, although they ended notably lower.

Communication services stocks plunged, led lower by Meta Platforms, Inc. META

Index	Performance (+/-)	Value
Nasdaq Composite	-0.64%	15,611.76
S&P 500 Index	-0.46%	5,048.42
Dow Industrials	-0.98%	38,085.80
Russell 2000	-0.72%	1,981.12

Insights From Analysts:

While conceding that the strength of the bull market has waned, an analyst said he does not see the end of it.

“The end of prolonged below-average bearish sentiment and above-average bullish sentiment implies investors may be losing some confidence in the strength of this bull market,” said LPL Financial Chief Technical Strategist Adam Turnquist. Technical evidence also supported this observation, he said, adding that dip-buyers stopped showing up near the S&P 500's 20-day moving average earlier this month, providing a timely signal for a deeper pullback.

The analyst, however, said the recent shift in sentiment may not mark the end of the bull market. Technically, he sees the 4,800 area on the S&P 500 as a worst-case scenario in the eventuality of a pullback.

“Confidence for a relatively limited drawdown is supported by breadth metrics holding up well, cyclical sector leadership, limited signs of panic in credit or volatility gauges, economic resiliency, and the longer-term momentum implications of this rally,” he said.

Carson Group’s Ryan Detrick also exuded optimism, albeit for a different reason. He noted that the “sell in May and go away” adage does not apply to the presidential election years. The May-October period, which typically is a weaker period for the market, tends to do well during election years, he said.

Sell in May?

Did you know that these 'worst six months' tend to do quite well in an Election year?

In fact, up nearly 78% of the time. pic.twitter.com/F2FNrWk3Fw

— Ryan Detrick, CMT (@RyanDetrick) April 25, 2024

The Commerce Department is scheduled to release its personal income and spending report for March at 8:30 a.m. EDT. On a month-over-month basis, the metrics may have increased 0.5% and 0.7%, respectively, in March compared to the 0.3% and 0.8% growth in February.

The price consumption expenditure index is expected to rise 0.3% month-over-month and 2.6% year-over-year. This compares to the February rates of 0.3% and 2.5%, respectively. The monthly rate of the core price consumption expenditure index may have remained unchanged at 0.3% and the annual rate may have slowed from 2.8% to 2.7%.

The University of Michigan’s final consumer sentiment index for April, due at 10 a.m. EDT, is expected to show the reading remained almost unchanged from the flash reading of 77.9, but down from 79.4 in March. Trades may also focus on the inflation expectations readings of the report.

See also: Best Futures Trading Software

Stocks In Focus:

• Alphabet climbed nearly 12% in premarket trading following its quarterly results announcement and dividend initiation and Microsoft rose a more modest 4%. Most AI-levered stocks moved in sympathy.
• Other stocks moving on earnings are Boyd Gaming Corporation BYD (down over 10%), Intel Corp. INTC (down nearly 7.5%), Roku, Inc. ROKU (down over 3%), ResMed Inc. RMD (up over 11%), Skechers U.S.A., Inc. SKX (up about 11.5%) and Teladoc Health, Inc. TDOC (down over 5%).
• AbbVie Inc. ABBV, Aon plc AON, Autoliv, Inc. ALV, AutoNation, Inc. AN, Barnes Group Inc. B, Charter Communications, Inc. CHTR, Colgate-Palmolive Company CL, Chevron Corporation CVX, Exxon Mobil Corporation XOM and Newell Brands Inc. NWL are among the companies due to report their quarterly results ahead of the market open.

Commodities, Bonds, and Global Equity Markets:

Crude oil futures rose for a second straight session, reversing their recent losses, and approached the $84-a-barrel mark, and gold futures also advanced to around $2,360 an ounce.

The 10-year note yield pulled back from Thursday’s level and yet held around the 4.68% mark.

Bitcoin BTC/USD gained modestly to around the $64.3K level.

Asian stocks ended Friday’s session on a mixed note, with most rebounding from the previous session’s sell-off. The Chinese and Hong Kong markets extended their gains, while Australia and New Zealand moved lower in a catchup move after remaining closed on Thursday.’

The Bank of Japan on Friday kept its policy rate unchanged but it lowered its growth forecasts for the economy.

Major European markets advanced in early trading, reversing from Thursday’s retreat, with the Euro STOXX 50 gaining about 0.68%.

Read Next: Fed’s Inflation Report Looms This Friday: What Makes It So Crucial For Markets?

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