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Dow Futures Gain On Senate Infrastructure Deal, Personal Spending Pullback

Stocks could test record highs again Friday following a Senate group breakthrough on infrastructure, but inflation concerns continue to keep gains in check.

The Friday Market Minute

  • Global stocks cautiously higher following a Senate group agreement on infrastructure, but PCE inflation data keeps gains in check.
  • Senate group agrees $1.2 trillion package over 8 years, boosting President Biden's economic agenda.
  • Nike shares set for a record high open after a fourth quarter earnings beat and a $50 billion 2022 revenue forecast.
  • Benchmark 10-year note yields hold at 1.488% ahead of today's PCE reading, while the dollar index slips 0.1% to 91.75 against its global currency peers.
  • Oil backs away from 2018 highs following another weekly surge, with Brent crude firmly north of the $75 per barrel mark.
  • CDC data shows 151.2 million Americans have now been fully vaccinated against the coronavirus, with around 320.6 million doses administered as of Thursday.
  • U.S. equity futures suggest a firmer open on Wall Street following in-line PCE Price Index data and slower personal spending.

U.S. equity futures extended gains Friday following a bi-partisan agreement among Senate lawmakers on a $1.2 trillion infrastructure bill ahead of another key inflation reading that could test the Federal Reserve's stance on interest rates.

President Joe Biden called the cross-party breakthrough a "huge day" for his broader economic agenda, adding it signals to global investors that America can "function, deliver, and do significant things".

With $529 billion in new spending and a $1.2 trillion commitment spread over eight years, however, the bill -- if passed -- will at once be one of the largest fiscal programs in U.S. history and a modest disappointment for Democrats who had hoped for a larger, more comprehensive package. 

Nonetheless, the massive injection, pared with the Fed's vow to keep interest rates at near zero percent for at least the next two years, is undoubtedly a bullish backdrop for equities heading into the second quarter earnings season, where collective S&P 500 profits are expected to rise more than 64% to a share-weighted total o $380 billion. 

A fly in the ointment, however, could come in the form of faster inflation that leads to a change in the Fed's timetable for interest rates, which at present aren't penciled in until at least 2023.

Today's May reading of the PCE Price index, the Fed's preferred inflation gauge, showed core pricing rising 3.6%, which would be the fastest in more than three decades, when the figures were released at 8:30 am Eastern time.

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A weaker reading on consumer spending, however, following the surprise decline for May retail sales, offset the impact of the fast inflation reading, setting up stocks for a firmer start to the Friday session following record high closes for S&P 500 and the Nasdaq Composite last night.

Futures contracts tied to the Dow Jones Industrial Average indicating a 170 point opening bell gain. 

Futures linked to the S&P 500, which is up 13.6% for the year, are priced for an 8 point gain while those tied to the Nasdaq are indicating a 24 point bump to the upside.

In terms of individual stocks, Nike  (NKE) - Get Report shares were surging 11.2% higher in heavy pre-market volume Friday at $148.58 each after the world's biggest sports apparel group posted stronger-than-expected earnings for its fiscal fourth quarter and said 2022 sales could rise past $50 billion. 

Netflix  (NFLX) - Get Report share were also active, rising 1.34% to $525.00 each after the streaming service was boosted to "outperform" by Credit Suisse, while General Electric  (GE) - Get Report added 0.4% in the wake of the Senate group's infrastructure breakthrough. 

In other markets, oil prices gave back some of this week's gains in early Friday trading, but remained within touching distance of October 2018 highs following Energy Department data earlier this week that showed domestic crude stockpiles at their lowest levels since March of 2020.

WTI futures for August delivery were marked 34 cents lower from yesterday's close in New York at $72.99 per barrel while Brent contracts for the same month slipped 27 cents to $75.29 per barrel.

In Europe, stocks were little-changed heading into the PCE price index reading, but were still just a few points shy of all-time highs, while Asia stocks got a boost from last night's rally on Wall Street to trade 1% higher around the region heading into the close of Friday trading.