The major Wall Street indexes were expected to start the day higher on Friday as data showing that inflation slowed in February raised expectations for the Federal Reserve to adopt a more accommodating monetary policy stance.
The personal consumption expenditure (PCE) index, the Federal Reserve’s preferred inflation indicator, increased by 0.3% on a monthly basis in February, according to the Commerce Department’s report, down from a 0.6% increase in January. According to the Fedwatch tool from CME Group, traders’ odds of a 25-basis-point rate rise in May are 55.5% higher than their odds of a pause at 44.5%.
According to Brandon Pizzurro, director of public investments at Guidestone Capital Management, “Since the Fed rate rises are now kind of starting to take affect right around a year after they first began, perhaps it is a hint that their hikes are starting to moderate inflation.”
Yet in terms of the Fed’s calculations, they will need further evidence that disinflation is actually taking root beyond a few isolated data points. Following the release of the data, 10-year Treasury rates hit a session low of 3.534%.
A stormy first quarter for equities will come to an end on Friday. This period was characterized by sticky inflation, repercussions from the failure of two smaller U.S. banks, warning indicators in several European institutions, and a Fed repricing of interest rate expectations.
With a movement towards key technology and growth sectors from financial stocks amid worries of a bank contagion, the Nasdaq is poised for its highest quarterly percentage increase since the end of 2020, while the cyclicals-heavy Dow Jones is in the negative.
The technology sector has grown by around 20% so far in the first quarter, while the financials index is on track to have its worst quarter since June. The benchmark S&P 500 is up nearly 6% overall.
While recent data, particularly an increase in weekly jobless claims, has encouraged optimism that the central bank is nearing the end of its market-punishing rate rises intended to reduce demand, several Fed officials have underlined a possible damage to the economy from troubles in the banking industry.
Both the S&P 500 banks index, which includes large banks, and the KBW Regional Banking index have experienced losses thus far this quarter of 19% and 14%, respectively.
Later in the day, University of Michigan will release statistics on consumer mood, and John Williams, the president of the New York Federal Reserve Bank, and Lisa Cook, the governor of the Federal Reserve, will both give speeches.
By 8:45 a.m. ET, the Dow e-minis had increased by 122 points, or 0.37%; the S&P 500 e-minis had increased by 11.5 points, or 0.28%; and the Nasdaq 100 e-minis had increased by 18.5 points, or 0.14%.
One company in particular, Virgin Orbit Holdings, plunged 41.8% premarket the day after the rocket manufacturer said it was laying off nearly 85% of its workforce due to a lack of fresh investment.
After the video-sharing website’s announcement of a boost in fourth-quarter sales, Rumble Inc. increased 11.0%.
