Nasdaq, S&P 500 Futures Build On Inflation-Data Momentum But Analyst Warn 'Desperately Craved' Rally May Not Sustain — Key Stocks To Watch Today

Zinger Key Points
  • Inflation inflected lower in October, raising hopes for a Fed pause or pivot.
  • The optimism has set off a rally in stocks but analysts have taken the data with a pinch of salt.

Trading in the U.S. index futures points to the buying momentum extending into the final session of the week. The market may turn to the University Of Michigan's consumer sentiment report for trading cues, although profit-taking could take some sheen off the rally.

Thursday, the major averages rallied out of the gates after October inflation data came in tamer than expected. After advancing through the session, stocks mostly ended at their highs of the session. The gains marked the biggest one-day advances since 2020.

The buying seen on Thursday was broad-based, with IT, real estate and consumer discretionary stocks outperforming the rest of the sectors.

The tech-heavy Nasdaq Composite Index settled at the highest closing level since Oct. 25, while the S&P 500 Index and the Dow Industrials ended at their highest levels in about two and three months, respectively.

U.S. Indices' Performance On Thursday
Index Performance (+/-)   Value
Nasdaq Composite +7.35%   11,114.15
S&P 500 Index _+5.54%   3,956.37
Dow Industrials +3.70%   33,715.37

Analysts, however, were on guard in their reaction to the inflation print.

“I don’t think we’re out of the woods yet by any means but today’s price action is encouraging for those who have stayed invested in a very difficult year for equities and fixed income,” said Brian Price, head of Investment Management for Commonwealth Financial Network.

The Fed may be comforted enough to ratchet down the pace of interest rate increases in their next few meetings but I think that they are still very much concerned about inflation and its impact on the consumer, he added.

Quincy Crosby, chief global strategist for LPL Financial said the inflation report, while indicating that inflation is moving in the right direction, does not suggest that inflation has been rooted out of the broader economy.

“Moreover, it certainly does not point to the proverbial 'pivot' that the market so desperately craves,” he said, adding that it bolsters the case that inflation continues along a downward trajectory.

The terminal rate could be hit in the first quarter of 2023 with a series of smaller rate hikes, Crosby said.

Here’s a peek into index futures trading:

U.S. Futures' Performance On Friday During Premarket Session
Index Performance (+/-)  
Nasdaq 100 Futures +0.78%  
S&P 500 Futures +0.53%  
Dow Futures +0.48%  
R2K Futures +0.50%  

In premarket trading on Friday, the SPDR S&P 500 ETF Trust SPY gained 0.58% to $396.98 and the Invesco QQQ TrustQQQ rose 0.86% to $285.19, according to Benzinga Pro data.

On the economic front, the University of Michigan’s preliminary consumer sentiment index for November is due at 10 a.m. EST. The index is expected to tick down from 65.6 in October to 64 in November. Traders may also focus on the one-year and five-year inflation expectations component from UMich’s survey.

See Also: S&P 500 Makes Historic Leap: Where Do We Go From Here?

Stocks In Focus:

  • Matterport, Inc. MTTR surged up close to 25% in premarket trading in reaction to its quarterly results.
  • Chinese e-commerce retailers, Inc. JD, Pinduoduo, Inc. PDD and Alibaba Group Holding, Inc. BABA rallied, reacting to the relaxation of COVID-19 curbs in China and also the Singles Day shopping festival that concludes Friday.
  • Nio, Inc. NIO, XPeng, Inc. XPEV and Li Auto, Inc. LI also surged.
  • Miners BHP Group BHP, Rio Tinto Group RIO and Freeport-,McMoRan, Inc. FCX were advancing.
  • Insurance broker GoHealth, Inc. GOCO tumbled close to 19% following the release of its quarterly results.
  • Tesla, Inc. TSLA saw follow-through buying.
  • Biopharma stocks, led by GlaxoSmithKline plc GSK were moving to the downside.

Commodities, Other Global Equity Markets:

Crude oil, which snapped its three-session rally on Thursday as the dollar eased amid the inflation data, is extending its gains. A barrel of WTI-grade crude oil traded over 3% higher.

Socks in the Asia-Pacific region fed off of Wall Street’s new-found optimism and advanced solidly on Friday. The European markets rose moderately on Friday, adding to the strong gains notched up on Thursday.

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