Futures Decline: Consumer Spending and PCE on the Horizon – Market Movers Explained

US Stock Futures Dip Ahead of Economic Data Release

US stock futures are trending lower as traders prepare for a new set of economic indicators to be released on Friday. Market participants will be analyzing consumer spending and inflation data to gain insights into the current state of the US economy, particularly with anticipated interest rate cuts from the Federal Reserve later this year.

1. Futures Decline

On Friday morning, US stock futures displayed a downward trend as investors awaited significant economic reports, including updated consumer spending statistics and the Fed’s preferred inflation measure. By 03:42 ET, Dow futures were down by 27 points or 0.1%, S&P 500 futures fell by 9 points or 0.2%, and Nasdaq 100 futures dropped by 73 points or 0.4%. This week, the S&P 500 achieved its third record close on Thursday, gaining 23 points or 0.4%.

This increase followed reports indicating a larger-than-expected decline in weekly jobless claims and a confirmation of 3% economic growth in the US for the second quarter. These positive developments fueled optimism about the robustness of the economy and job market as the Federal Reserve signals readiness for a policy easing cycle after a significant interest rate reduction last week.

2. Upcoming Consumer Spending and PCE Data

Investors are closely monitoring the upcoming personal spending and inflation data, which could shed light on the US economy’s health as the Fed considers more rate cuts in the near future. Personal spending, which represents over two-thirds of economic activity, is expected to grow by 0.3% in August, a slowdown from the 0.5% increase noted in the previous month.

Economists also anticipate that the personal consumption expenditures (PCE) price index—a key inflation measure for Fed officials—will rise by 0.2% on a monthly basis in August, consistent with July’s pace, while the year-on-year figure is expected to ease to 2.3% from 2.5%. Excluding volatile items like food and energy, the PCE price index is forecasted to remain at July’s monthly growth rate of 0.2% but is projected to increase slightly to an annual rate of 2.7%, up from 2.6%.

3. Intel Nears $8.5 Billion Funding Deal with US Government

Intel is reportedly close to finalizing an agreement with the US government that would grant $8.5 billion in funding to the semiconductor company by the year’s end, according to industry reports. Discussions are said to be in advanced stages; however, it’s noted that the finalization of this deal isn’t guaranteed by the end of 2024. Any potential acquisition activity involving Intel could impact these negotiations, as the company has attracted interest from competitors, including Qualcomm, which is considering a stake in Intel.

4. Costco’s Revenue Falls Short of Expectations

Costco reported its fiscal fourth-quarter revenue did not meet analyst expectations, attributed to decreased spending on high-ticket items and lower gasoline prices impacting the warehouse chain’s performance. Following the report, shares experienced a decline in extended trading hours. CFO Gary Millerchip mentioned that consumer spending behavior showed a trend towards being more selective, with shoppers increasingly hunting for discounts on products like televisions and home appliances. Revenue for the quarter grew nearly 1% to $79.69 billion, although this fell below Wall Street’s forecast of $79.93 billion, while net income of $5.29 per share exceeded expectations.

5. Oil Prices Decline

Oil prices fell on Friday and are expected to show a weekly loss, as traders reassess the potential increase in oil output from Libya and the OPEC+ alliance. As of 03:43 ET, Brent crude futures decreased by 0.2% to $70.94 per barrel, while West Texas Intermediate crude futures dipped by 0.1% to $67.67 per barrel.

Recent agreements among competing factions in Libya’s central bank aim to resolve disputes that have limited oil production and exports. Analysts suggest this could lead to more than 500,000 barrels per day returning to the market. Additionally, OPEC+ is planning to incrementally reverse 180,000 barrels per day of existing output cuts in December. Market participants are considering the implications of potentially increased supply amid a substantial stimulus package announced in China earlier this week, though uncertainty remains about its impact on the country’s oil consumption.