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U.S. stocks set to open higher despite hot inflation read as technology sector marches higher


May 26, 2023

By Joseph Adinolfi and Steve Goldstein

U.S. stock index futures looked set to open slightly higher despite a stronger-than-expected reading on April inflation as technology stocks continued to march higher.

What’s happening

On Thursday, the Dow Jones Industrial Average fell 35 points, or 0.11%, to 32765, the S&P 500 increased 36 points, or 0.88%, to 4151, and the Nasdaq Composite gained 214 points, or 1.71%, to 12698.

What’s driving markets

U.S. stocks looked set to open modestly higher on Friday even after a reading on the Federal Reserve’s preferred inflation gauge showed prices rose by more than economists had expected last month, causing equity futures to pare some of their gains from earlier in the session.

The PCE price index showed core inflation rose 0.4% in April, more than the 0.3% increase that economists had expected. Core inflation strips out volatile food and energy prices. The yearly increase in prices rose to 4.4% from 4.2% in the prior month.

Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said inflation appeared to be moving “in the wrong direction” at the start of the second quarter.

A day earlier, a surge in technology stocks driven by Nvidia’s (NVDA) optimistic, artificial intelligence-fueled outlook for sales in the second quarter had helped boost the Nasdaq and S&P 500. Nvidia’s shares also rose more than 24%, with the company adding nearly $200 billion to its market capitalization, one of the biggest one-day increases in the history of corporate America.

On Friday, another microchip maker, Marvell Technology (MRVL), was rising in premarket trade after saying AI has emerged as a key growth driver.

But beyond the AI frenzy, concerns lingered that the U.S. would not agree to raise the debt ceiling, though reports indicate progress in talks between President Joe Biden and House Speaker Kevin McCarthy House Republicans have already left Washington ahead of the holiday weekend.

While Treasury Secretary Janet Yellen says the U.S. could run out of money as early as June 1, other projections estimate the federal government may have until the middle of the month.

“I think we’ll all be able to exhale by mid-June, although it will likely be an increasingly volatile market environment between now and then,” said Kristina Hooper, chief global market strategist at Invesco. “Once that drama recedes, I think all eyes will be back on central banks.”

-Joseph Adinolfi

Companies in focus

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(END) Dow Jones Newswires

05-26-23 0907ET

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