Caution clouded U.S. stocks before the opening bell on Friday as traders eagerly anticipated a crucial inflation metric, a key factor influencing the Federal Reserve’s policy decisions. 

A potential easing of inflationary pressures, if confirmed by the inflation component of the personal income and spending report for November, may trigger a stock rally, setting the stage for the unofficial start of the Santa Claus rally next week. 

Trading volume could remain light in the thin pre-holiday market, with the stock market closed on Monday for Christmas.

Nike, Inc.’s NKE disappointing guidance has added to trader nervousness about the outlook for earnings growth in the upcoming year.

Cues From Thursday’s Trading:

Stocks rebounded significantly after a session of profit-taking had pushed the market lower in the previous session. The rebound was supported by positive earnings reports from memory chipmaker Micron TechnologyInc. MU, along with encouraging GDP and consumer confidence data affirming the strength of the economy.

Major averages opened higher, maintaining positions above the unchanged line throughout the session and closing near session highs. Technology stocks displayed notable strength, with communication services, IT, and IT services stocks gaining ground. Additionally, consumer discretionary, healthcare, industrial, and material stocks also experienced positive movements during the session.

US Index Performance On Thursday

Index Performance (+/-) Value
Nasdaq Composite +1.26% 14,963.87
S&P 500 Index +1.03% 4,746.75
Dow Industrials +0.87% 37,404.35
Russell 2000 +1.73% 2,017.06

Analyst Color:

The catalyst for the recent market rally is the fall in bond yields, said fund manager Louis Navellier. The 10-year Treasury bond peaked on October 19th at 4.99% and then plunged to under 3.84% intraday in recent weeks, he noted.

“There is definitely a ‘do not worry, be happy’ mood enveloping Wall Street as interest rates decline,” Navellier said, adding “The fact that we are now in the holidays also helps boost consumer and investment sentiment.”

The fund manager expects the buying to extend through November of 2024. “If history repeats, the stock market should rally right up to the November election and be aided by endless campaign promises as well as multiple Fed cuts,” he said.

“Due to falling Treasury yields, easy year-over-year earnings comparisons, an accommodative Fed, resurging economic growth, the U.S. dominating energy production, and an upbeat Presidential campaign, I am expecting the stock market to explode to the upside,” he added.

Futures Today

Futures Performance On Friday

Futures Performance (+/-)
Nasdaq 100 -0.10%
S&P 500 +0.01%
Dow -0.23%
R2K -0.03%

In premarket trading on Thursday, the SPDR S&P 500 ETF Trust SPY edged up 0.01% to $472.76 and the Invesco QQQ ETF QQQ fell 0.07% to $407.50, according to Benzinga Pro data.

Upcoming Economic Data:

The Commerce Department is scheduled to release its durable goods orders report for November at 8:30 a.m. ET. Economists, on average, expect durable goods orders growth of 1.7% month-over-month, reversing some of the 6.7% drop in October. Core durable goods orders excluding the volatile transportation orders, may have increased by 0.2% following flattish performance in the previous month.

The Commerce Department is scheduled to release the personal income and spending report for November at 8:30 a.m. ET. The consensus estimates call for a 0.4% month-over-month increase in personal income and a more modest 0.2% climb in personal spending. Both metrics rose at a 0.2% pace in October.

The year-over-year change in the ore personal consumption expenditure index, often called as the Fed’s favorite inflation gauge is estimated to come in at 3.4%, down from 3.5% in October.

The Commerce Department will release its new home sales report for November at 10 a.m. ET. Economists expect new home sales to come in at a seasonally adjusted annual pace of 695,000 units compared to the October rate of 679,000.

The University of Michigan is due to release the final reading of its consumer sentiment index for December at 10 a.m. ET. The index is expected to be unchanged at the preliminary reading of 69.4, up from 61.3 in November. Traders may also keep an eye on the inflation components of the report.

See Also: Best Futures Trading Software

Stocks In Focus:

  • Nike fell nearly 12% in premarket trading following the release of its quarterly results. Foot Locker, Inc. FL and Under Armor, Inc. UA moved in sympathy
  • Occidental Petroleum Corporation OXY rose about a percent after Warren Buffett’s Berkshire Hathaway, Inc. BRK BRK disclosed a stake build in the oil producer.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures climbed 1.02% to $74.64 in early European session on Friday after slipping 0.44% on Thursday.

The benchmark 10-year Treasury note fell 0.025 percentage points to 3.869% on Friday.

Most major Asian markets showed lackluster sentiment on Friday, although the Hong Kong market fell sharply after China suggested it would impose more curbs on gaming companies. The major European markets that remained open traded almost flat to modestly lower in late-morning trading.

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