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S&P 500 FUTURES MUTED AFTER MIXED PCE, DATA DELUGE

U.S. stock futures have firmed up slightly after a fresh wave of economic data, including the latest PCE inflation report.

S&P 500 E-mini futures EScv1 are now roughly flat, a slight improvement from the roughly 0.2% drop seen just before the data hit. Futures had already been under some pressure earlier Thursday, as rising tensions between the U.S. and Iran weighed on sentiment and cooled hopes for any near-term diplomatic breakthrough.

On the data front, the Fed’s preferred inflation gauge delivered a mixed read. The April PCE price index rose 0.4% month over month -- just under the 0.5% estimate -- while the annual rate came in right on target at 3.8%.

Core PCE, which strips out food and energy, was a bit softer than expected on the monthly reading, rising 0.2% versus a 0.3% estimate. The year-over-year core figure matched expectations at 3.3%.

Elsewhere, personal income was flat in April, missing forecasts for a 0.4% increase, while consumer spending came in right in line with expectations, up 0.5%.

Durable goods orders, however, surprised to the upside, jumping 7.9% -- well above the 3.5% forecast. Even stripping out transportation, orders rose 1.1%, beating the 0.5% estimate.

On the labor side, jobless claims ticked up slightly to 215,000 from 211,000 the previous week.

Meanwhile, the second estimate for first-quarter GDP came in at 1.6%, below expectations for a 2.0% reading.

According to CME’s FedWatch tool, traders still see a 99% chance the Fed holds rates steady at its June meeting, unchanged from before the data release. The odds of a 25-basis-point cut remain very slim, at around 1%.

Looking further out, rate expectations barely moved, with markets pricing in roughly 15 basis points of tightening through December 2026.

In the bond market, the 10-year Treasury yield US10YT=RR eased slightly to around 4.47%, down from about 4.51% just before the data.

Energy XLE.P is leading S&P 500 sector SPDR ETF gains, up about 0.76%, while real estate XLRE.P is the weakest group, down roughly 0.3%. Regional banks are also slightly lower, with the KRE ETF off around 0.1%.

Regarding the data, David Laut, chief investment officer at Kerux Financial in Granite Bay, CA, said:

"Thursday's PCE is the first inflation reading under new Federal Reserve Chair Kevin Warsh, and it confirms what we already know, which is that inflation is far too high above the Fed's 2% target, thanks to a resurgence of inflation since the Iran war began."

Laut added, "While Thursday's data may fuel fears of a looming rate hike, oil prices are starting to abate and the Fed rarely sets policy based on oil shocks alone."

"We think it's unlikely the Federal Reserve hikes rates, given how the oil price spike is likely to be short-term, and since there is immense pressure on the Fed to keep rates in check and a hike would require an especially rare set of circumstances, such as a year or longer of $100 per barrel oil, and we are nowhere near that point yet."

April new home sales data is due at 10 a.m. The estimate is for 0.665M units versus the prior read of 0.682M.

Here is a premarket snapshot from shortly after 9 a.m. EDT:

(Terence Gabriel, Karen Brettell)

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