Dow Futures Inch Higher Despite Inflation Jitters

Stock futures in the United States were indicating a stable beginning on Friday, with concerns about prolonged inflation dampening the momentum following a strong start to the year.

What’s happening

  • Futures trading on the Dow Jones Industrial Average YM00 increased by 53 points, or 0.1%, reaching 39,400.
  • Futures on the S&P 500 ES00, +0.22% increased by 0.1%, or 7 points, reaching 5,225.
  • The Nasdaq 100 NQ00 futures rose by 10 points, or 0.1%, to reach 18,282.

The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all experienced declines on Thursday. The DJIA dropped by 138 points to 38,906, the SPX fell by 0.3% or 15 points to 5,150, and the COMP lost 49 points to 16,128.

The S&P 500 has gained 8% this year.

What’s happening

Traders were faced with a new report on Thursday that revealed inflation was decreasing more slowly than initially thought, as producer prices were increasing at a faster rate than expected.

According to Benjamin Melman, the global chief investment officer of asset management, Edmond de Rothschild, a private banking firm, has decreased its investment in U.S. Treasurys because it believes there is a higher risk of inflation in the United States compared to Europe.

Melman stated that U.S. stocks are not currently experiencing a bubble. He noted that while both the AI craze and the internet bubble were driven by high earnings growth expectations, the difference now is that there is some initial earnings momentum to support the optimism. Melman pointed out that Nvidia’s current PE ratio is 36 for 2024, which is considered a high valuation but achievable for a high-growth stock.

The company is neutral towards stocks, both overall and specifically in the United States, due to the anticipated decrease in available funds.

Melman’s attention was on the decreasing reserve balances at the Federal Reserve, but analysts are also closely watching Japan. The country’s main group of unions has announced a significant 5.3% increase in wages for its largest companies, the highest in over three decades. This development could prompt the Bank of Japan to potentially end its negative interest-rate policy in the near future, possibly as soon as next week or within the next month.

On Friday, the Empire State manufacturing survey, import prices, industrial production, and University of Michigan consumer sentiment data will be released.

Options linked to over $5 trillion worth of stocks, exchange-traded funds, and equity indexes are scheduled to expire on Friday during the quarterly triple witching.

Adobe was under scrutiny because the sales guidance for its current quarter fell below the expectations of Wall Street analysts.

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