U.S. Futures Steady Ahead of Key PCE Inflation Data

Market Overview and Key Indicators

U.S. stock futures showed mixed performance as investors awaited the release of the Personal Consumption Expenditures (PCE) inflation index, a key measure influencing Federal Reserve policy. Dow Jones futures edged up 0.2%, while the S&P 500 futures were largely flat, and Nasdaq futures fluctuated with slight gains and losses. The PCE index is expected to reflect a 0.3% month-over-month increase and a 2.7% year-over-year rise, potentially impacting market expectations for further rate cuts.

Economic data released earlier in the week provided a mixed picture. Initial jobless claims fell to 218,000, surpassing economists' median forecast of 235,000, signaling continued labor market resilience. Additionally, existing home sales were reported at 4.0 million, slightly ahead of the 3.96 million forecast, suggesting a marginal improvement in housing market activity. However, broader market sentiment remained cautious ahead of the inflation report, which could sway the Federal Reserve’s future monetary policy decisions.

Sector-Specific Movements and Trade Tariffs

Semiconductor stocks led gains, with Intel Corporation surging 8.87% after reports surfaced that the company is exploring investment partnerships with Taiwan Semiconductor Manufacturing Co. (TSMC) and Apple Inc. The news bolstered optimism around the semiconductor sector, which has faced headwinds from supply chain disruptions and geopolitical tensions.

Meanwhile, trade tensions escalated as the U.S. announced a series of tariffs, including a 100% levy on branded pharmaceutical imports and additional duties on furniture and heavy trucks. These measures, set to take effect on October 1, weighed on manufacturing and pharmaceutical stocks. Furniture companies such as Wayfair and Bed Bath & Beyond saw declines of 5.3% and 4.1%, respectively, in pre-market trading. Pharmaceutical stocks in Asia also fell sharply overnight, reflecting investor concerns over global supply chain disruptions and increased production costs.

Investor Sentiment and Broader Economic Context

Investor sentiment remained cautious as markets awaited the PCE inflation data, which could solidify or challenge expectations of a Federal Reserve rate cut in the coming months. Federal Reserve policymakers have recently signaled a more measured approach, with CME Group's FedWatch tool indicating an 87.8% probability of a rate cut by October. However, elevated equity valuations leave little room for disappointment if inflation remains persistent.

Globally, Asian markets extended their declines on Friday, with most indices in the red except for the Malaysian Stock Exchange. European markets, on the other hand, opened higher, supported by easing energy prices and positive corporate earnings. Trade tensions, particularly President Trump’s tariff announcements, added to market volatility, further complicating the inflation outlook. Geopolitical factors, including continued conflict in Ukraine and renewed trade disputes, remain key risks for investors, heightening the need for cautious positioning in rate-sensitive sectors such as technology and consumer discretionary.