US open: Stocks edge higher as spending and core inflation cools

(Sharecast News) - US stocks moved into positive territory on Friday, with the Dow snapping a three-day losing streak, after economic data showed that core inflation had personal spending slowed more than expected in April. Futures were falling ahead of the report at 0830 EDT, but rallied following the data, with the Dow and S&P 500 up 0.1% to 0.2% by 0950 EDT. The Nasdaq meanwhile was trading flat.

According to the US Department of Commerce, personal income and spending rose at a month-on-month clip of 0.3% and 0.2% in April respectively. Economists had penciled in increases of 0.3% for both.

Meanwhile, the monthly change in the price deflator for personal consumption expenditures was up by 0.3%, as expected. However, at the core level PCE price gains clocked in at 0.2%, recording their slowest month-on-month gain so far this year and slightly below the 0.3% increase expected.

"The weaker tone of both the spending and PCE inflation data in April are the first of a series of softer reports needed for the Fed to begin cutting interest rates later this year," said Michael Pearce, deputy chief US economist at Oxford Economics.

"Both headline and core inflation were unchanged in y/y terms, underlining that it will take a series of more favourable reports before the Fed feels confident enough to begin cutting interest rates. With four more inflation reports to go between now and the September FOMC meeting, we still think there is a good chance the Fed will cut rates at that meeting. That contrasts with market pricing, which now suggests the first cut will come in December."

Markets have fallen sharply this week, with the Dow dropping 2.5% across the past three sessions, as indices pulled back from recent record highs.

Analysts at JPMorgan said on Friday that liquidity in US financial markets was starting to dry up, and we've entered a "mildly contracting phase", similar to 2022. "This follows a rapidly expanding phase from the end of April 2023 to the end of March 2024. In our opinion, this negative delta in the trajectory for U.S. money supply poses a challenge for risk assets going forward," the bank said.

In corporate news, Dell shares tanked despite the tech group beating both revenue and profit forecasts with its first-quarter results after the bell on Thursday. The stock down 19%, with some profit taking likely after the shares have more than doubled in price since the start of 2024.

Elsewhere, Nordstrom, Costco, Ulta Beauty, SentinelOne and MongoDB were also falling after releasing their quarterly earnings after the bell on Thursday, while Gap, Zscaler, Ambarella and NetApp all impressed with their results.