US Stocks Look To End Week On High Note As Nvidia Leads Mega-Caps Higher In Premarket Ahead Of Key Inflation Data

Author: Shanthi Rexaline | July 26, 2024 07:39am

After the severe pounding the tech space received in the past three sessions, it might be rebound time. However, any recovery will largely hinge on whether key inflation data confirms the continued downward trajectory in pricing pressure. The major index futures are notably higher early Friday. Tamer inflation data could reinforce hopes of a September rate hike and more for the rest of the year, proving supportive of the market rally, especially amid the small-cap space.

Traders may also take cues from some quarterly reports as they nervously wait for next week’s earnings news flow from the likes of Apple, Inc. (NASDAQ:AAPL), Amazon, Inc. (NASDAQ:AMZN), Microsoft Corp. (NASDAQ:MSFT) and Meta Platforms, Inc. (NASDAQ:META) and the Federal Reserve’s rate-setting meeting.

Futures	Performance (+/-)
Nasdaq 100	+0.98%
S&P 500	+0.74%
Dow	+0.58%
R2K	+1.62%

In premarket trading on Friday, the SPDR S&P 500 ETF Trust (NYSE:SPY) moved down 0.75% to $542.43, while the Invesco QQQ ETF (NASDAQ:QQQ) gained 1.00% to $462.87, according to Benzinga Pro data.

Cues From Last Session:

U.S. stocks closed Thursday’s session on a mixed note, as early optimism generated by strong GDP data did not sustain throughout the session. Negative tech news weighed down on the Nasdaq Composite and the S&P 500 indices, sending them notably lower for a third straight day. The former pulled back toward its lowest close since June 7, and the latter slumped to the lowest since June 11.

The 30-stock Dow Jones Industrials Average ignored a negative start and traded mostly above the unchanged line, with International Business Machine Co.’s (NYSE:IBM) 4%+ gain lending support.

Second-quarter GDP rose at an annualized quarter-over-quarter pace of 2.8%, faster than the 1.4% growth in the first quarter and the core PCE inflation slowed. Comerica Chief Economist Bill Adams commented on the report, “The GDP report will reassure the Fed that there's no need for immediate rate cuts.”

“The Fed is expected to hold their policy rate steady at next Wednesday's decision and signal a cut coming in September,” he added.

Energy, industrial and utility stocks gained ground in the session, while the IT and communication services stocks were among the biggest decliners.

Index	Performance (+/-)	Value
Nasdaq Composite	-0.93%	17,181.72
S&P 500 Index	-0.51%	5,399.22
Dow Industrials	+0.20%	39,935.07
Russell 2000	+1.26%	2,222.98

Insights From Analysts:

Commenting on the recent market pullback, spearheaded by the tech stocks, LPL Chief Technical Strategist Adam Turnquist said, “Technical damage is beginning to mount for the broader market.”

Thursday’s decline led the S&P 500 to break below key support at the 20-day moving average, violating a short-term uptrend. “Momentum confirmed the breakdown as select indicators turned bearish for the first time in several months, ” he said.

Turnquist said the pullback was due to the weakness seen in mega-caps as well as the historically overbought conditions. “The good news is that there is still a lot of support in play before the S&P 500's longer-term uptrend is challenged and strong momentum tends to be sustainable on a longer-term basis, although the path is not linear,” the strategist said.’

“Based on this backdrop, we recommend a neutral equities allocation and tactically buying dips once support is established and momentum improves.”

Upcoming Economic Data:

• The Bureau of Economic Analysis is scheduled to release the personal income and spending report for June at 8:30 a.m. EDT. Economists, on average, expect personal income and spending to rise 0.4% and 0.3% on a month-over-month basis. This compares to May’s growth of 0.5% and 0.2%, respectively. The annual rate of the Personal Consumption Expenditure (PCE), the Fed’s preferred measure of inflation, is projected to remain at 2.6%, unchanged from the May reading. On a month-over-month basis, the personal consumption expenditure index may have increased by 0.1% compared to flat performance in May.
• The University of Michigan will release the final consumer sentiment index for July at 10 a.m. EDT. The flash reading released in mid-July came in at 66, down from 68.2 in June. The report also comprises key inflation expectation readings.

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Stocks In Focus:

• Deckers Outdoor Corporation (NYSE:DECK) climbed over 11% in premarket trading following the company’s quarterly results. Boyd Gaming Corporation (NYSE:BYD) climbed over 5%, Mohawk Industries, Inc. (NYSE:MHK) climbed over 14% and DexCom, Inc. (NASDAQ:DXCM) plunged over 35%, all reacting to their earnings.
• 3M Company (NYSE:MMM), Barnes Group Inc. (NYSE:B), Bristol-Myers Squibb Company (NYSE:BMY), Newell Brands Inc. (NASDAQ:NWL), Colgate-Palmolive Company (NYSE:CL) and Charter Communications, Inc. (NASDAQ:CHTR) are among the key companies due to release their earnings reports ahead of the market open.
• Tech stocks firmed up in premarket, led by Nvidia Corp. (NASDAQ:NVDA), Micron Technology, Inc. (NASDAQ:MU), Broadcom Inc. (NASDAQ:AVGO) and Advanced Micro Devices, Inc. (NASDAQ:AMD).
• Coinbase Global, Inc. (NASDAQ:COIN) gained over 4.6% amid the strength in cryptos, while crypto mining stocks also gained ground.

Commodities, Bonds And Global Equity Markets:

Crude oil futures pulled back after two straight sessions of gains, as they traded around $78_a-barrel, while gold futures rebounded from Thursday’s sharp pullback. The 10-year Treasury note yielded 4.242%, down 1.2 basis points. Bitcoin (CRYPTO: BTC) climbed over 5% and traded above the $67K mark.

The major Asian markets closed on a mixed note, with the Taiwanese market, which remained closed on Thursday, playing catchup with the losses in the region. The Japanese, Malaysian, New Zealand and Singaporean markets ended lower, while the remainder of the major markets advanced.

European stocks are higher in early trading on Friday.

Read Next:

• Investors Go All In On Small Caps, Pour Over $6 Billion Into Russell 2000 ETF This Month: They ‘Will Return To Larger-Cap Alternatives,’ Veteran Analyst Says

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