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U.S. stock futures weaken ahead of key inflation data, as traders weigh whether to extend rate-hope rally

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U.S. stock futures slipped on Friday ahead of key economic data, as traders weigh whether to extend a rally fueled by hopes the Federal Reserve is nearing an end to its aggressive rate-hike campaign.

What’s happening
  • Dow Jones Industrial Average
    YM00,
    -0.07%
    futures fell 36 points, or 0.1%, to 33987.

  • S&P 500
    ES00,
    -0.29%
    futures dropped 13 points, or 0.3%, to 4063.

  • Nasdaq 100
    NQ00,
    -0.51%
    futures decreased 69 points, or 0.6%, to 12038.

On Thursday, the Dow Jones Industrial Average
DJIA,
+0.61%
rose 206 points, or 0.61%, to 33949, the S&P 500 increased 44 points, or 1.1%, to 4060, and the Nasdaq Composite
COMP,
+1.76%
gained 199 points, or 1.76%, to 11512.

The S&P 500
SPX,
+1.10%
has climbed 15% from its lows of October.

What’s driving markets

Analysts said the details of economic data released Thursday, including gross domestic product and durable-goods orders, were softer than they appeared at the headline, and seem to show an economy deteriorating if not outright headed for a recession.

Bill Diviney, senior economist U.S. at ABN Amro, said the GDP report showed an acceleration of the deterioration in investment, while more volatile components such as inventories and governnment spending drove the strength in the report.

“Given the weakness evident late in the fourth quarter, as well as the incoming data for January so far, we continue to expect Q1 GDP to show a decline in output, with our current estimate for around a 1% annualized contraction. We expect declining output to persist into Q2, which would meet the technical recession definition of two consecutive quarters of falling output,” he told clients in a note.

Friday’s data releases include the PCE price index, the Fed’s preferred measure of inflation. The core PCE price index is seen decelerating to a 4.4% year-over-yera rate in December from 4.7% in November. Hann-Ju Ho, an economist at Lloyds Bank, also is forecasting core PCE at a 4.4% rate, and the headline number at 4.9%, down from 5.5%, in addition to personal spending dropping 0.2%.

“Such outturns would reaffirm that inflation is on the way down and economic growth is slowing, adding to expectations that U.S. interest rates are close to peaking,” he said. Economists expect the Fed to lift rates by a quarter-point next week but are divided on how high rates will go this year.

Intel
INTC,
+1.31%
was in the spotlight after the microchip maker missed expectations on adjusted earnings and revenue.

Credit: marketwatch.com

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