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A trader works on the floor of the New York Stock Exchange in New York, US, on Friday, Aug. 23, 2024.
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Stock futures ticked higher Thursday night as investors prepared for a crucial inflation reading that's closely watched by the Federal Reserve.
Futures tied to the Dow Jones Industrial Average advanced 19 points, or 0.05%. S&P 500 futures gained 0.1%, while Nasdaq 100 futures added 0.2%.
In extended trading, Ulta dropped about 7% after missing top and bottom line expectations in the second quarter, while athletic apparel retailer Lululemon Athletica gained 6% on better-than-expected earnings. Dell Technologies added 3% as its fiscal second quarter results beat estimates, aided by server sales.
The market has seen choppy trading action this week leading up to Nvidia's quarterly results. The artificial intelligence darling slumped on Thursday, weighing on the S&P 500 and dragging the Nasdaq Composite lower. The Dow was the outlier among the three major averages, adding more than 240 points to close at a fresh record.
A new catalyst for stocks awaits on Friday at 8:30 a.m. ET: the personal consumption expenditures price index. Economists polled by Dow Jones anticipate a 0.2% monthly increase in July for headline prices, or 2.5% on an annual basis. The core reading is expected to have gained 0.2% from the prior month, or 2.7% from 12 months earlier.
The Fed keeps a close eye on this metric, and it could still influence policymakers' rate decision in September.
"The market is set to absorb the results of the PCE release, with consensus estimates focused on the core year-over-year report inching slightly higher at 2.7% following 2.6% for the previous print," said LPL Financial's chief global strategist Quincy Krosby.
"Because there are some Fed members suggesting they need more data to confirm that inflation is continuing on a downward path before agreeing to cut rates, any surprise indicating a hotter report could be negative for the market," she added.
As August's trading winds down, the S&P 500 is on pace for a nearly 1.3% gain, while the Dow is on track to add 1.2%. The Nasdaq Composite is the sole loser of the three major averages, off by nearly 0.5% this month.
On the week, the S&P 500 and the Nasdaq are on pace for declines of 0.8% and 2%, respectively — the first losing week in three for both indexes. The Dow is on pace for its third positive week, up 0.4% in the period.
Rate cuts could benefit large-cap bank stocks for the first three months, Wells Fargo says
Large-cap bank stocks could see a boost through year end from an interest rate cut, according to Wells Fargo.
More specifically, the bank wrote that rate cuts that coincide with no recession have typically led to bank stocks rallying after initially declining by 6% in the first one or two weeks.
"While we acknowledge that historically, bank stocks have sold off for a short period following the first rate cut, banks can outperform in a soft landing scenario, increasing 21% from the post-cut low, based on data from rate cut cycles in 1995, 1998 and 2019 (pre-COVID)," Wells Fargo analyst Mike Mayo wrote. "We estimate banks outperformed the S&P 500 by nearly 10% from trough to peak during the quarter following the first rate cut (next Fed meeting 9/17-18)."
— Lisa Kailai Han
Ugly sales figures from Lululemon and Ulta Beauty
Lululemon's earnings per share beat expectations by a solid 22 cents.
The athleisure apparel retailer seemed to hold the line on pricing, which benefited profit margins in the latest quarter. But that strategy might have come at the cost of sales volumes.
Lululemon posted its first revenue miss since March 2022 and same-store sales only rose 2% — a fraction of the 5.9% expected by Wall Street. A major problem was the slump in North America, which has seen significant sales deceleration in recent quarters. Same-store sales in the region have now gone from up 7% in the fourth quarter of last year to flat in the first quarter of this year to now down 3% in the latest quarter. Revenue guidance for both the third quarter and the full year are also weak.
And there's little beauty in Ulta's results this afternoon. The cosmetics retailer posted its first earnings miss since May 2020 and its first revenue miss since December 2020. Its same-store sales fell 1.2%, while Wall Street expected a 1.2% gain. Traffic dropped nearly 2%. The company also slashed its full year earnings, revenue and same-store sales guidance – all of which are below consensus estimates. The company now expects a same-store sales decline of up to 2% this year, while analysts projected a 2% rise.
— Robert Hum
English (US) ·