LDN - Business

S&P, Nasdaq futures rise ahead of inflation data; Applied Materials surges

[February 16, 2024] By Amruta Khandekar and Ankika Biswas

(Reuters) -Futures tracking the S&P 500 and the Nasdaq gained on Friday as investors looked forward to a producer inflation report for more cues on the timing of interest rate cuts, while shares of Applied Materials surged following an upbeat revenue forecast.

January's slump in U.S. retail sales revived optimism about imminent rate cuts from the Federal Reserve this year, providing some relief after a hotter-than-expected consumer prices report earlier this week.

The tech-heavy Nasdaq is set to snap a five-week winning streak, while the benchmark S&P 500 also lost some steam this week after jumping over 5% so far this year.

Robust corporate earnings and a surge in enthusiasm around the potential for artificial intelligence has helped the S&P 500 close above the 5,000-point mark for the fourth time this year.

The producer prices index (PPI) for January, due at 8:30 a.m. ET (1330 GMT), is expected to show prices inched up 0.1% after an unexpected dip last month. It will further shape the outlook for the Fed's monetary policy path.

Traders' bets of a start to the Fed's easing cycle are tilted towards June, with 37% betting on an at least 25-basis-point rate cut as soon as May, according to the CME Group's FedWatch tool.

"The inflation shock from the U.S. earlier in the week seems to have been shrugged off for now, even if it has pushed back expectations for when the Federal Reserve will start cutting interest rates," AJ Bell investment director Russ Mould said in a note.

"So-called factory gate prices are significant because when manufacturers and other producers charge more for goods and services the higher costs usually feed through to the consumer," Mould added, referring to the producer prices report.

Investors will also monitor remarks due in the day by Fed's Richmond President Thomas Barkin and San Francisco chief Mary Daly, both voting members this year.

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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 14, 2024. REUTERS/Brendan McDermid/File Photo

Atlanta Fed President Raphael Bostic on Thursday noted he saw fewer rate cuts in his last forecasts compared with his colleagues in part because he has been expecting less steady progress on inflation.

Later in the day, eyes will also be on a U.S. consumer sentiment survey for February from the University of Michigan.

At 7:08 a.m. ET, Dow e-minis were down 30 points, or 0.08%, S&P 500 e-minis were up 9.25 points, or 0.18%, and Nasdaq 100 e-minis were up 98.25 points, or 0.55%.

Among big movers, Applied Materials jumped 13.1% in premarket trade after the semiconductor equipment supplier forecast better-than-expected second-quarter revenue on strong demand for advanced chips used in artificial intelligence.

Roku slumped 16.8% after forecasting a bigger first-quarter loss, while crypto exchange Coinbase Global jumped 13.6% on posting its first quarterly profit since 2021.

DoorDash dropped 7.2% as the delivery firm forecast a quarterly profitability metric below expectations, hurt by higher labor costs.

A total of 80.3% of S&P 500 companies that have reported quarterly earnings so far have beaten expectations compared to the annual 76% average, according to LSEG data on Thursday.

Most megacap stocks also advanced, with Nvidia gaining 1.4% after Oppenheimer hiked its price target on the AI chip designer's stock.

(Reporting by Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Maju Samuel)

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