Futures mixed as investors await key inflation data

[March 31, 2023]  By Amruta Khandekar and Ankika Biswas

(Reuters) -U.S. stock index futures were mixed on Friday as investors awaited inflation data for cues on the Federal Reserve's monetary policy path amid receding fears of a banking crisis.

The Commerce Department is expected to release the February reading of the personal consumption expenditures (PCE) price index, the Fed's preferred measure of inflation, at 8:30 am ET (12:30 GMT).

The report is expected to show consumer spending, which accounts for more than two-thirds of U.S. economic activity, likely rose 0.3% in February, after jumping 1.8% in January.

"People are somewhat cautious (ahead of the data). It's just a matter of how the inflation numbers come out and if there is a drop in both top and core, then the market can continue to rally," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Friday will cap a turbulent first quarter for stocks, marked by sticky inflation, shockwaves from the collapse of two regional U.S. banks and signs of trouble in some European banks, as well as a repricing of interest rate expectations from the Fed.

The Nasdaq is set for its biggest quarterly percentage gain since the end of 2020 given a rotation into major technology and growth stocks from financial stocks amid fears of a bank contagion, while the cyclicals-heavy Dow Jones is in the red.

The benchmark S&P 500 is up nearly 6% so far in the first quarter.

Some Fed officials have noted a potential hit to the economy from banking sector problems, while recent data including an uptick in weekly jobless claims has supported hopes that the central bank is close to the end of its market-punishing rate hikes aimed at cooling demand.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 30, 2023. REUTERS/Brendan McDermid

Traders' bets of a 25-basis-point rate hike from the Fed in May stand at 52.5%, with the remaining odds for a no-hike scenario, according to CME Group's Fedwatch tool.

The KBW Regional banking index and the S&P 500 banks index, which houses major banks, have lost 19% and 14%, respectively, so far during the quarter.

At 7:01 a.m. ET, Dow e-minis were up 76 points, or 0.23%, S&P 500 e-minis were up 7.75 points, or 0.19%, and Nasdaq 100 e-minis were up 1.25 points, or 0.01%.

Major technology and other growth stocks such as Apple Inc, Microsoft Corp and Alphabet Inc fell about 0.2% in premarket trade on Friday as U.S. Treasury yields ticked higher.

Consumer sentiment data from the University of Michigan is due later in the day, while New York Federal Reserve Bank President John Williams and Fed Governor Lisa Cook are also scheduled to speak.

Among specific stocks, Virgin Orbit Holdings tanked 45.3% premarket, a day after the rocket maker said it was cutting about 85% of staff because it had not been able to raise new investment.

U.S.-listed shares of Canadian software firm BlackBerry Ltd dropped 4.0% following disappointing results and outlook.

Rumble Inc jumped 14.6% after the video-sharing platform reported a surge in fourth-quarter revenue.

(Reporting by Amruta Khandekar and Ankika Biswas; Editing by Nivedita Bhattacharjee and Vinay Dwivedi)

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