The Nasdaq is set for a higher open on Thursday, buoyed by weaker-than-expected producer price data, easing concerns about persistent inflation and bolstering expectations of Federal Reserve rate cuts later this year.
While S&P 500 and Dow Jones futures suggest a subdued start, the Nasdaq’s outlook appears brighter.
The Labor Department report revealed a modest 0.2% increase in the Producer Price Index (PPI) for final demand in March, slightly below economists’ forecasts. Annually, the index rose to 2.1%, below estimates. This unexpected moderation in price pressures eased investor concerns and maintained hopes for possible Fed rate adjustments.
Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvest, highlighted the surprise in producer prices, considering the recent increase in raw material and input prices. He emphasized that these developments could influence the next Personal Consumption Expenditures (PCE) report.
Additionally, initial jobless claims for the week ending April 6 were lower than expected at 211,000, indicating continued strength in the labor market.
The previous session saw a sharp sell-off in the market after March consumer price data came in higher than expected, raising concerns that the Federal Reserve could delay rate cuts until September. Minutes from the central bank’s March meeting revealed officials’ apprehensions about the progress of inflation, raising the possibility of prolonged monetary tightening.
In response, several brokerages revised their rate cut projections: UBS Global Wealth Management anticipated rate cuts would begin in September instead of June, while BNP Paribas forecast the first cut in July.
Government bond yields retreated from Wednesday’s highs, with the 10-year bond down to 4.5375%. Market confidence in monetary policy easing has moderated, and expectations for rate cuts in 2024 have eased to around 45 basis points, down from around 150 basis points at the start of the year.
Investors’ attention remains focused on comments from Richmond Fed President Thomas Barkin and Atlanta Fed President Raphael Bostic, which provide insight into the path of the central bank’s rates.
The upcoming first-quarter earnings season gains momentum on Friday, with major banks including JPMorgan Chase & Co, Citigroup and Wells Fargo releasing their quarterly results.
In pre-market trading, biotech company Alpine Immune Sciences rose 36.6% after Vertex Pharmaceuticals announced its acquisition for about $4.9 billion. Meanwhile, Albemarle gained 1.4% after an improvement from Berenberg, and CarMax fell 9.0% due to lower fourth-quarter earnings. Industrial supplies maker Fastenal also fell 5.0% after missing revenue and profit estimates for the first quarter.
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