U.S. stock index futures surged on Friday, putting the S&P 500 and the Nasdaq on track for record highs as investors geared up for a key inflation report amid signs of a dovish policy outlook from the Federal Reserve this year.
Personal Consumption Expenditure data – the U.S. central bank’s preferred inflation gauge – for May is due to be released at 8:30 a.m. ET and will be scrutinized to assess the Fed’s interest-rate path as tariffs weigh on prices.
As the ceasefire in the Middle East holds, investor focus has turned to the prospect of a dovish Fed after the Wall Street Journal reported that U.S. President Donald Trump toyed with the idea of announcing Fed Chair Jerome Powell’s replacement by September or October.
“News that Donald Trump may announce his pick to be the new Fed chair with months to go has led the interest rate futures market to ramp up bets that interest rates in the U.S. will be cut sharply over the coming months and years,” Kathleen Brooks, research director at XTB, said in a note.
A spate of economic data this week, including a weaker-than-expected first quarter GDP reading as well as jobless claims reaching multi-year highs, has supported the case for the central bank to cut borrowing costs this year.
Traders now price in a 20.7-per-cent chance of a rate cut in July, compared with 14.5 per cent last week, according to CME Group’s FedWatch tool.
At 6:30 a.m. ET, Dow E-minis were up 103 points, or 0.24 per cent, S&P 500 E-minis were up 13.5 points, or 0.22 per cent, and Nasdaq 100 E-minis were up 63.5 points, or 0.28 per cent.
Nike’s shares rose 9.2 per cent in premarket trading after the retailer forecast a smaller-than-expected drop in first-quarter revenue.
Retailer Lululemon Athletica rose 1.4 per cent after Nike’s results, while Hoka-owner Deckers Outdoor added 2.1 per cent.
On the flip side, gold stocks slipped in premarket trading as bullion neared a one-month low. Top miners such as Newmont and U.S.-listed Barrick Mining were down 2.3 per cent and 2 per cent, respectively.
The benchmark S&P 500 and the Nasdaq are on track for their best weekly performance in six weeks, while the blue-chip Dow is set for a weekly advance, if gains hold.
UBS Global Wealth Management raised its year-end target for the S&P 500 index to 6,200 from its prior forecast of 6,000, banking on softening trade uncertainty.
Adding to the upbeat sentiment, Washington reached an agreement with China on expediting rare-earth shipments to the United States, a White House official said, days ahead of the July 9 deadline for Trump’s “reciprocal” tariffs.
Also on tap is the final reading of consumer sentiment for June, measured by the University of Michigan Surveys of Consumers, due at 10:00 a.m. ET.
Remarks from New York Fed President John Williams, Cleveland Fed President Beth Hammack and Fed Board Governor Lisa Cook are expected later in the day.
European stock indexes opened on higher on Friday, helped by signs of progress in U.S.-China trade talks, while the dollar slipped to its lowest in more than three years.
Global stock markets have rallied to record highs this week, as traders took confidence from a ceasefire between Iran and Israel and markets stepped up bets for U.S. rate cuts.
A trade agreement between the U.S. and China on Thursday on how to expedite rare earth shipments to the U.S. was also seen by markets as a positive sign, amid efforts to end the tariff war between the world’s two biggest economies.
European shares rose in early trading, after Asian shares hit their highest in more than three years in early trading, tracking the Wall Street rally.
The pan-European STOXX 600 was up 0.9 per cent on the day, set for a 1.1-per-cent weekly gain. London’s FTSE 100 was up 0.5 per cent and Germany’s DAX was up 0.8 per cent.
The MSCI World Equity Index was up 0.2 per cent on the day at set for a weekly gain of 2.9 per cent.
The S&P 500 index is up just 4.4 per cent this year overall, following a volatile first half of the year, dominated by U.S. President Donald Trump’s “Liberation Day” tariff announcement on April 2, which sent stocks plunging.
“What we are having right now is potentially some optimism about some trade deals,” said Vasileios Gkionakis, senior economist and strategist and Aviva Investors.
“We have quite come from quite low levels in the aftermath of the Liberation Day in April. To a certain extent we have also had some mini-selloff on the back of the events in the Middle East, and in that sense we’re rebounding.”
“I think it’s very early days, but I think there is a sense in the market that we are getting a bit fatigued with the theme of trade, and trade wars and trade deals, and would like to move past that,” he added.
Mr. Trump has set July 9 as the deadline for the European Union and other countries to reach a deal to reduce tariffs.
The U.S. dollar’s decline continued, with the dollar index down 0.2 per cent on the day at 97.183, its lowest in more than three years. The euro was at $1.1713, getting a lift after data showed French consumer prices rose more than expected in June.
Markets are focused on U.S. monetary policy, as traders weigh up the possibility of Trump announcing a new, more dovish, chair of the Federal Reserve.
Traders have stepped up their bets on U.S. rate cuts, and are now pricing in 64 basis points (bps) of easing this year versus 46 bps expected on Friday.
The dollar is having its worst start to a year since the era of free-floating currencies began in the early 1970s.
“I don’t think it’s just the repricing of the Fed, I think there is a broader issue here of some tarnishing of U.S. exceptionalism,” Aviva Investors’ Gkionakis said.
Core PCE price data, the U.S. central bank’s preferred measure of inflation, is due later in the session.
European bond yields were mostly steady, with the benchmark 10-year German bond little changed at 2.567 per cent.
In commodities, oil prices were set for their biggest weekly decline since March 2023, as prices cooled back down after spiking briefly above US$80 on news of the Israel-Iran conflict. Brent crude futures were trading at US$68.35 a barrel, and U.S. West Texas Intermediate crude was at US$65.24 a barrel .
Reuters
