Futures Decline as Consumer Spending and PCE Loom – What’s Influencing the Markets

US stock futures are trending downward as traders prepare for a new round of economic data scheduled for release on Friday. Investors will have the opportunity to analyze consumer spending and inflation statistics in their efforts to gauge the current state of the US economy, especially with the potential for additional interest rate cuts from the Federal Reserve later this year.

1. Futures Decline

On Friday, US stock futures showed a decline as investors anticipated the release of various economic indicators, including updated consumer spending data and the Federal Reserve’s preferred inflation measure.

By 03:42 ET, the Dow futures declined by 27 points or 0.1%, S&P 500 futures decreased by 9 points or 0.2%, and Nasdaq 100 futures fell by 73 points or 0.4%.

Earlier in the week, the benchmark S&P 500 achieved its third record close on Thursday, gaining 23 points or 0.4%. This rise was supported by data indicating that weekly jobless claims had dropped more than expected, alongside a final report confirming that the US economy grew by 3% in the second quarter. These figures bolstered optimism about the economy and labor market stability, suggesting that the Federal Reserve may proceed with a cycle of policy easing following a significant rate cut last week.

2. Upcoming Consumer Spending and PCE Data

Investors are closely monitoring forthcoming personal spending and inflation data, which may offer insight into the health of the US economy as the Federal Reserve is expected to pursue further rate cuts in the coming months.

Personal spending, which makes up over two-thirds of economic activity, is projected to have increased by 0.3% in August, a slowdown from the prior month’s 0.5% rise. Economists also anticipate that the Personal Consumption Expenditures (PCE) price index, a primary inflation tracker for the Federal Reserve, will rise by 0.2% on a monthly basis for August, consistent with July’s pace, while the year-on-year number is expected to ease from 2.5% to 2.3%.

Excluding volatile categories like food and energy, the PCE price index is anticipated to maintain July’s monthly rate of 0.2%, with an annual increase expected to rise slightly from 2.6% to 2.7%.

3. Intel and US Government Funding Talks

Intel and the US government are reportedly in advanced discussions to finalize an $8.5 billion funding deal by year’s end, according to sources familiar with the negotiations. While the talks are progressing well, the finalization of the agreement is not guaranteed by the end of 2024.

Potential takeover discussions involving Intel could complicate these negotiations. The company is currently implementing cost-cutting strategies aimed at strengthening its struggling business, and it has attracted attention as a potential acquisition target, with rival Qualcomm showing interest in acquiring a stake in Intel.

4. Costco Falls Short on Revenue

Costco’s fiscal fourth-quarter revenue fell below analyst expectations, impacted by decreased spending on high-ticket items and dropping gasoline prices. Following the earnings report, the company’s shares declined in after-hours trading.

Chief Financial Officer Gary Millerchip noted that consumers are becoming more selective with their spending, searching for deals on items like televisions and home appliances. Although gas prices rose by 5.4% during the reporting period ending September 1, this was a slower increase than the 6.6% rise seen in the previous quarter. Costco’s revenue rose nearly 1% to $79.69 billion, which was below the anticipated $79.93 billion, though net income of $5.29 per share surpassed expectations.

5. Oil Prices Decline

Oil prices fell on Friday, continuing a trend toward weekly losses as traders evaluated the potential for increased output from Libya and the OPEC+ coalition. By 03:43 ET, Brent crude futures dipped by 0.2% to $70.94 per barrel, while US West Texas Intermediate crude futures decreased by 0.1% to $67.67 per barrel.

In Libya, conflicting factions managing the central bank reached an agreement to resolve their disputes, which had previously hindered the country’s oil production and exports. Analysts have indicated that around 500,000 barrels per day of Libyan supply could soon return to the market. Additionally, OPEC+ plans to reverse 180,000 barrels per day of ongoing output cuts in December. Investors are weighing the implications of this potential supply increase alongside recent stimulus measures introduced in China, though uncertainty remains regarding their impact on economic activity in the world’s largest oil importer.