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Dow Futures Gain as Recovery Bets Trump Inflation Concern; Bitcoin Steadies

Solid economic recovery signals - even with hotter inflation - are moving bond markets Friday, and that's providing a smooth backdrop for stocks heading into the final trading day of a volatile week.

The Friday Market Minute

  • Global stocks edge higher as economic activity data highlights the strength of the post-pandemic recovery while bond market reaction to faster inflation signals remains muted.
  • European PMI data speeds at the fastest pace in three years, while U.S. jobless claims fall to the lowest levels since the pandemic began.
  • Bitcoin holds at just over $40,000 despite comments on systemic risk from Fed Chair Jay Powell and a move by the IRS to make larger transfers reportable for taxation.
  • Benchmark 10-year note yields ease to 1.625% in overnight trading while the dollar index slips 0.1% to 89.717.
  • CDC data shows 126.6 million Americans have now been fully vaccinated against the coronavirus, with around 279.4 million doses administered as of Wednesday.
  • U.S. equity futures suggest a modestly firmer open on Wall Street ahead of first quarter earnings from Deere and Foot Locker and May PMI data at 9.45 am Eastern time.

U.S. equity futures inched higher Friday, building on gains from last night's close and fueled by improving economic data, stable bond markets and a modest rebound in tech stocks.

More of the same could add to Friday gains following a stronger-than-expected reading of economic activity in Europe, where PMI data rose to the highest levels in three years, and a surge in retail sales in Britain, each underscoring the impact of successful vaccine rollouts and state re-openings around the region.

In the U.S., May PMI data will be released at 9:45 am Eastern time and should indicate both an ongoing surge in activity as states continue to relax business and travel restrictions and a leap in input prices as supply-chain bottle necks and the recent commodity market rallies take their toll on purchasing managers. 

Still, with the Federal Reserve reiterating its view that inflation pressures will ease over the second half of the year, bond markets have remained relatively stable amid the faster-than-expected readings of CPI and factory gate prices last month, and with benchmark 10-year note yields easing to 1.627% in overnight trading, stocks have a solid backdrop with which to close out a volatile week.

Futures contracts tied to the Dow Jones Industrial Average indicate a modest 125 point opening bell gain, while those linked to the S&P 500 are price for a 14.5 point move to the upside. Nasdaq futures, meanwhile, suggest a 50 point gain for the tech-focused benchmark. 

Bitcoin prices held just over the $40,000 mark in early U.S. trading, with markets thus far shrugging off a warning on systemic risk from Fed Chairman Jerome Powell and moves from the IRS to make transfers over $10,000 reportable for tax purposes. 

The dollar index, however, was marked 0.11% lower on the session at 89.703 -- not far off the lowest levels in three years -- as investors pare back bets on a near-term move from the Fed following the release of minutes from its April interest rate meeting.

The weaker dollar is giving a late-week lift to oil prices, which have suffered under the weight of demand concerns in Asia amid a renewed surge in new coronavirus cases, and the prospect of additional supply from Iran following nuclear treaty talks between Washington and Tehran.

WTI crude futures for July delivery were marked 84 cents higher at $62.78 per barrel while Brent contracts for July, the global benchmark, added 75 cents to trade at $65.87 per barrel.

European stocks were modestly higher following the solid May PMI data, with Germany's DAX gaining 0.2%, while Britain's FTSE 100 slipped 0.3% as the pound climbed to 1.4203 against the U.S. dollar and commodity-lead stocks drifted lower on the session.

In Japan, a weaker yen -- helped by slowing inflation data -- helped the Nikkei 225 to a 0.78% gain on the session, while weak China stocks kept gains for the region-wide MSCI ex-Japan in check as the benchmark edged 0.24% higher heading into the close of trading.