LIVE MARKETS-US stock futures pare losses slightly after PCE

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U.S. STOCK FUTURES PARE LOSSES SLIGHTLY AFTER PCE

The main U.S. equity index futures down on the day, but off their worst levels, in the wake of the release of the latest Personal Consumption Expenditures (PCE) report.

E-mini S&P 500 futures EScv1 are down about 0.4% vs a loss of around 0.6% just before the numbers were released.

The April headline PCE number on a month-over-month basis came in at 0.1% which was in-line with the estimate. The year-over-year print was 2.1% vs a 2.2% Reuters Poll. The core PCE index on a month-over-month basis and on a year-over-year basis came in at 0.1% and 2.5% which were both in-line with estimates.

April personal income month-over-month came in at 0.8% which was well above the 0.3% estimate. April adjusted consumption at 0.2% was flat with the Reuters Poll.

The April advance goods trade balance came in at -$87.62 billion vs a -$143 billion estimate:

According to the CME's FedWatch Tool, the probability that the Fed leaves rates unchanged at its June 17-18 meeting is unchanged at around 98% vs just prior to the release of the economic data. The chance that the FOMC cuts rates by 25 basis points is 2%.

Looking further out into 2025, the FedWatch Tool is still showing a bias for rate cuts in September and December. Indeed, interest rate probabilities are pricing in 50.3 basis points of cuts this year.

The U.S. 10-Year Treasury Yield US10YT=RR is now around 4.43%. It was around 4.42% just before the numbers came out. The yield ended Thursday at 4.424%.

A majority of S&P 500 sector SPDR ETFs are lower in premarket trade with materials XLB.P, down around 0.7%, taking the biggest hit. Communication services XLC.P and staples XLP.P are both edging up.

The SPDR S&P regional banking ETF KRE.P is off around 0.5%.

Regarding the data, Gene Goldman, chief investment officer at Cetera Investment Management in El Segundo, CA, said:

"Core PCE the Fed's preferred measure of inflation came in a little bit mild which is the direction the Fed wants to see. However we know that tariffs tend to be deflationary at first because higher prices hurt demand, so the Fed will be more focused on the next few inflation readings for the true impact of tariffs on inflation,"

Goldman added "While there were no surprises in the PCE number, markets were focusing their attention more on the U.S. China trade discussion which based on comments from Trump and Bessent seem to be hitting a roadblock."

In terms of additional data, May Chicago PMI is expected at 09:45 a.m. ET. The estimate is for 45 vs 44.6 last month. The May University of Michigan's final sentiment read is due at 10:00 a.m. ET. The Reuters Poll calls for 51.0 vs a prior read of 50.8.

Here is a premarket snapshot from 08:53 a.m. ET:

(Terence Gabriel, Sinéad Carew)

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