Dow Jones, S&P 500, Nasdaq set for lower open as key inflation data arrives in-line

9.40am: Intel stock drops on dismal earnings report  

US stocks edged lower at the open on Friday, following a mixed bag of corporate earnings, even as the S&P 500 is on track for a winning week.  

Just after the market opened, the Dow Jones Industrial Average lost 25 points to 33,924, while the S&P 500 eased 8 points at 4,053 and the tech-heavy Nasdaq Composite slipped 7 points to 11,507.

Notable stock movers included shares of Intel Corporation, which slid more than 10% after the chipmaker’s latest financial results fell short of expectations and company issued weak guidance.   

“This year’s stock market rally is impressive and shouldn’t be ignored,” Independent Advisor Alliance chief investment officer Chris Zaccarelli said.

“Unfortunately, the Fed is likely to start talking down the market again, as early as next week, so prepare for volatility again this year; we may be in the eye of the hurricane and not completely out of the woods yet,” he added.

9.20am: US consumer spending down, PCE inflation in-line

US households cut spending in December, adding to signs of an economic slowdown, as underlying inflation cooled at its slowest pace since October 2021.

Spending by US households decreased 0.2% in December from the prior month, the US Commerce Department said Friday, compared with a downwardly revised 0.1% decrease in November. Households cut spending on goods last month and increased spending slightly on services.

The personal-consumption expenditures (PCE) price index – the Federal Reserve’s preferred gauge of inflation – rose 5.0% in December from a year earlier, after increasing 5.5% in November.

The core PCE-price index, which removes volatile food and energy prices, rose 4.4% in December from a year earlier – its slowest pace since October 2021 – compared with 4.7% in November.

On a month-to-month basis, the PCE-price index rose 0.1% in December from the prior month, matching November’s increase. Core prices rose 0.3% in December from the prior month, up from November’s 0.2% increase.

The Fed is set to make its first interest rate decision of 2023 at a meeting next week. Officials have signaled that a quarter-point increase is likely which would mark a slower pace of interest-rate increases compared with last year.

US stock futures stayed marginally lower following the as-expected data.

6.30am: Fed back in the spotlight

Wall Street is expected to open lower on Friday, giving back some of Thursday’s post-GDP strong gains, as the market anticipates inflation data that will also help decide the Federal Reserve’s next move when its rate-setting committee meets next week. 

Futures for the Dow Jones Industrial Average (DJIA) declined less than 0.1% in pre-market trading, while those for the broader S&P 500 index dropped 0.2%, and contracts for the Nasdaq-100 fell 0.5%.

Stocks rallied in the previous session as investors responded to news that the US economy grew by a bigger-than-expected 2.9% in the fourth quarter of 2022, and continued to digest corporate earnings reports.  

The DJIA added 0.6% to finish at 33,949, while the S&P 500 gained 1.1% to 4,060 and the Nasdaq Composite jumped 1.8% to 11,512.

“Renewed hopes for a soft economic landing cheered investors, as economic growth continued amid the tightening interest rate environment,” commented Richard Hunter, head of markets at interactive investor. 

“Next week will provide further colour, with a Fed policy meeting which is expected to result in a further 0.25% rate hike, and with a non-farm payroll release which could well confirm that the labour market remains tight.

“In the meantime, today will also see the release of the Personal Consumption Expenditure (PCE) price index, the Fed’s preferred inflation measure, which will give further indications on whether its policy is having the desired effect,” he said. 

The PCE index, due for release before the market opens, is expected to show a 0.3% month-over-month rise in core inflation – which excludes volatile food and energy prices – for December, with the annual rate seen declining to 4.4% from 4.7% in November, according to Reuters consensus estimates.

“Meanwhile the current earnings season is in full flow, with mixed messages remaining the order of the day,” Hunter continued. “Although around two-thirds of the companies which have reported so far have beaten estimates, expectations are that earnings will nonetheless have fallen on the whole.

“The latest updates included a strong reaction to numbers from Tesla and American Airlines, the former of which added to tech gains alongside the likes of Microsoft, Amazon and Alphabet. Less positively, stocks dropping after their latest updates included IBM and Southwest Airlines,” he added.

Chevron, American Express and Colgate-Palmolive are among the companies scheduled to report their quarterly earnings today.