US open: Stocks pare some losses as inflation cools

US futures

Dow futures +0.03% at 33919

S&P futures -0.3% at 4046

Nasdaq futures -0.47% at 11993

In Europe

FTSE -0.07% at 7757

Dax -0.14% at 15095

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US core PCE cools to 4.4%

US stocks are pointing to a mixed open as investors digest a mixed bag of data and the latest corporate earnings.

While core PCE, the Fed’s preferred gauge of inflation, cooled to 4.4% YoY in December, down from 4.7% and the slowest pace since late 2021. On a monthly basis, core PCE rose 0.3%, as forecast. Meanwhile, personal spending fell -0.2% in December, more than the -0.1% forecast and the -0.1% decline recorded in January, suggesting that consumers are coming under pressure.

The data comes after yesterday’s GDP release, which showed that the US economy grew at a faster rate than expected in Q4, reining in recession fears.

The reaction to today’s data has been relatively muted. However, futures pared some losses as inflation cools, further adding to mounting evidence that the worst inflation is now in the rear view mirror.

The relatively quiet market reaction could be because the data was largely in line with forecasts and hasn’t impacted on Fed future rate hike expectations, but it could also be because few are prepared to take on big positions ahead of next week’s Federal Reserve rate decision.

The Fed is widely expected to slow the pace of rate hikes to 25 basis points from 50 next week.

Attention will now turn to US Michigan confidence data which is expected to confirm the preliminary reading of 64.6 in January, up from 59.7 in February.

Corporate news

Intel is falling pre-market after the chipmaker posted dire results on disappointing guidance, putting the rest of the sector lower. The chipmaker reported a net loss of over $660M in Q4, more than twice the $278M forecast. sales tumbled 32% as demand, particularly for personal computing, tumbled. The outlook was also on nothing, with Intel saying it expects a further decline in sales.

Where next for the Nasdaq?

The Nasdaq has been grinding higher, cautiously rising above the 200 sma at 11940, which, combined with the bullish MACD and RSI over 50 keeps buyers optimistic of further gains. Buyers will look for a rise over 12100, the 100 sma, and 12215 the December high. On the flip side, should the 200 sma fail to hold, sellers could look to test 11640 the multi-month falling trendline support, with a break below here exposing the 50 sma at 11490. A break below 11250 creates a lower low.

FX markets – USD rises, EUR falls

The USD is rising as investors digest the latest core PCE inflation print and yesterday's GDP data, which raised hopes that the Fed could engineer a soft landing for the US economy.

GBP/USD has traded within a familiar range across the week after two straight weeks of gains. Few a willing to take on big positions ahead of next week’s BoE MPC meeting, where the central bank is expected to hike rates by 50 basis points to fight double-digit inflation.

EUR/USD is fourth quarter eurozone GDP day 10 starts to dribble in. bane reported that its economy grew 0.2% QoQ, in line with forecasts. Germany, France and Italy will report Q4 GDP next week. The ECB interest rate decision is also due next week; the ECB is expected to hike rates by 50 basis points.

GBP/USD -0.63% at1.2350

EUR/USD -0.2% at 1.0858

Oil rises as US recession fear ease

Oil prices are rising for a third straight day and are heading for the third straight week of gains, boosted by better-than-expected US GDP data and on hopes of a salvage recovery in Chinese demand.

Stronger than unexpected economic growth In the US, the world’s largest consumer of oil has helped investors reign in recession fears boosting the demand outlook. This comes at a time when demand in China, the world’s largest oil importer, is also expected to rise as the economy reopens post-Covid.

Attention will now be turning to the OPEC meeting next week, where the group of oil producers will review crude production levels; no changes to the current output policy are expected.

WTI crude trades +1.3% at $82.20

Brent trades at +1.5% at $88.43

Learn more about trading oil here.

Looking ahead

15:00 US Michigan consumer confidence

15:00 US Pending home sales