US stock futures held steady on Friday following a turbulent session on Thursday that saw significant losses across major indices. The Dow Jones Industrial Average experienced its worst day since March 2023, plummeting 1.53%. The S&P 500 and Nasdaq Composite also fell, losing 0.74% and 0.39% respectively. The sell-off was driven by hotter-than-expected PMI data, which heightened fears that interest rates could remain elevated for an extended period.

Corporate Performance:

• Intuit: In extended trading, Intuit shares dropped over 6% after the company issued weak guidance for the current quarter.
• Tech Sector: Mega-cap tech stocks suffered sharp declines, with AMD falling 3.1%, Tesla down 3.5%, Apple dropping 2.1%, Amazon losing 1.1%, and Alphabet declining by 1.6%.
• Nvidia: Contrarily, Nvidia surged 9.3% on an earnings and revenue beat, driven by strong demand for AI chips.
• Boeing: The aircraft manufacturer fell 7.6% after its CFO projected negative free cash flow and no recovery in aircraft deliveries for the second quarter, citing ongoing production challenges.

Economic Data and Federal Reserve Outlook:

The dollar index strengthened around 105 on Friday, poised for a weekly gain as stronger-than-expected US economic data tempered expectations for Federal Reserve interest rate cuts this year. Key data points included:

• PMI Data: S&P Global reported that US business activity accelerated to a two-year high in May.
• Jobless Claims: The latest weekly jobless claims fell more than expected, indicating a resilient labor market.

The Federal Open Market Committee (FOMC) minutes revealed ongoing concerns about stubborn inflation, with some members indicating a readiness to tighten policy further if inflation surges. Consequently, markets are now pricing in just one rate cut this year, with the first reduction anticipated in December.

Bond Market and Interest Rates:

The yield on the US 10-year Treasury note rose towards 4.47%, continuing its rebound from the one-month low of 4.35% recorded on May 15th. This rise reflects investor expectations of a prolonged period of restrictive monetary policy by the Federal Reserve.

Upcoming Economic Indicators:

Investors are keenly awaiting further guidance from the US durable goods report for April and the University of Michigan’s consumer sentiment index for May, both due on Friday. These indicators are expected to provide additional insights into the economic outlook and potential monetary policy adjustments.

Currency and Global Economic Outlook:

The dollar strengthened broadly, reaching three-week highs against the yen as Japan’s inflation slowed further in April. The strong US economic data and the firming dollar underscore the potential for the Fed to maintain a tighter monetary stance.

The US stock market remains on edge as investors digest the latest economic data and Federal Reserve signals. With mounting evidence of persistent inflation and strong economic activity, the outlook for interest rate cuts this year has diminished.

More By This Author:

Nasdaq 100 Futures Surge On Nvidia’s Strong Earnings; Mixed Signals From Federal Reserve
U.S. Stock Futures Steady As Nasdaq Hits Record; Investors Eye Fed Moves
U.S. Equities Near Record Highs As Investors Parse Mixed Economic Signals Ahead Of Key Inflation Report