US stocks set to open higher despite high inflation as tech sector gains

By Joseph Adinolfi and Steve Goldstein

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

What is happening

On Thursday, the Dow Jones Industrial Average fell 35 points, or 0.11%, to 32,765, the S&P 500 rose 36 points, or 0.88%, to 4,151, and the Nasdaq Composite gained 214 points, or 1.71%, to 12,698.

What drives the markets?

U.S. stocks looked set to open slightly higher on Friday, even after a reading from the Federal Reserve’s favorite inflation gauge showed prices had risen more than economists had expected last month, which led to a reduction in equity futures gains from the start of the session.

The PCE price index showed core inflation rose 0.4% in April, more than the 0.3% rise economists had forecast. Core inflation eliminates volatility in food and energy prices. The annual price increase rose to 4.4% from 4.2% the previous 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 tech stocks driven by an upbeat, artificial intelligence-fueled sales outlook from Nvidia (NVDA) in the second quarter helped boost the Nasdaq and S&P 500. Nvidia shares also rose by more than 24%, with the company adding nearly $200 billion to its market capitalization, one of the largest single-day increases in US corporate history.

On Friday, another microchip maker, Marvell Technology (MRVL), was rising in premarket trading after saying AI had become a key growth driver.

But beyond the AI ​​frenzy, concerns remained that the United States would not agree to raise the debt ceiling, although 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 United States could run out of money as early as June 1, other projections estimate the federal government could have until the middle of the month.

“I think we can all breathe by mid-June, although it will likely be an increasingly volatile market environment by then,” said Kristina Hooper, chief global market strategist at Invesco. “Once this drama is over, I think all eyes will once again be on central banks.”

-Joseph Adinolfi

Companies in the spotlight

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently of Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswire

05-26-23 0907ET

Copyright (c) 2023 Dow Jones & Company, Inc.

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