U.S. stock futures inch higher ahead of Fed’s favorite inflation gauge

All three indexes are looking at gains of 3% to 4% for the week. The S&P 500 is poised for its first weekly gain in eight weeks, according to FactSet.

What’s driving the markets?

Investors will focus on a heavy load of economic data on Friday, with the Fed’s preferred inflation gauge, the core personal consumption expenditure index deflator, in the spotlight. The core PCE is expected to have gained 4.9% in April annually, a drop from 5.2% in March, according to economists polled by Dow Jones Newswires and The Wall Street Journal.

And: What if we get a ‘soft landing’ for the economy after all?

Investors will also get disposable income and consumer spending for the same month, along with advance international trade in goods, all at 8:30 a.m. Eastern Time. The University of Michigan’s final consumer sentiment index for May is due at 10 a.m. Eastern.

“Personal spending is expected to be up 0.7% in April, compared with 1.1% in March,” Sophie-Lund Yates, lead equity analyst at Hargreaves Lansdown, told clients in a note. “A weaker number in today’s announcement would give further reason to expect that the Fed’s next rate decision will be to pause, rather than increase – as it suggests inflation’s core is having some of its energy sapped on its own.”

Thursday’s gains in stocks stemmed from some relief over the Fed’s latest minutes, which drove speculation over for a potential pause later this year by the central bank to assess interest rates. A hardy batch of earnings reports from retailers also helped boost markets.

Read: Forget the ‘Fed put’ – here is how corporate buybacks could rescue stocks

Big Lots Inc.
BIG,
+2.41%
will be among the last retailers to report this week, with results expected ahead of the market open. A reminder of the tough times facing many retailers came late Thursday when Gap Inc.
GPS,
+4.41%
reported a wider-than-expected loss and disappointing forecast. Shares were down nearly 15% in premarket trading.

While major U.S. stock indexes are poised for gains his week, wariness remains among strategists over whether Wall Street volatility may have ebbed for now. “The equity market reacted exuberantly to the near term recession fears abating, but the haven bid has not faded from the Treasury market,” said Michael O’Rourke, chief market strategist at JonesTrading,

“It is only a matter of time before yields are back above 3%. If it happens in the next few days, that month end rebalance will flip. Fading recession fears and the prospect of China reopening is setting the stage for energy to breakout,” as crude and natural-gas prices remain elevated, he said.

“The upward inflation spiral is teetering on heading to a very painful place. As
we have noted repeatedly, the longer markets continue to deny the reality of the need to reprice and tighten financial conditions, the more leeway the FOMC has to continue to tighten,” said O’Rourke.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.729%
was flat at 2.748%, while the dollar
DXY,
+0.09%
was modestly lower and oil prices
CL00,
-0.35%
were edging higher.

And: Howard Marks explains how to avoid crashes by learning to recognize signs of bull-market excess

What companies are in focus?

• Baidu Inc.’s
  BIDU,
  +14.14%
  Hong Kong-listed shares
  9888,
  +14.26%
  surged 14% after the Chinese search engine’s first-quarter results beat expectations and as several analysts raised their stock-price targets.

• Marvell Technology Inc. shares 
  MRVL,
  +5.62%
  were up 3% after the semiconductor group reported solid earnings results and slightly-better-than expected guidance.

• Ulta Beauty Inc.
  ULTA,
  +7.09%
  shares surged 8% in premarket trading after the beauty products retailer lifted its full-year sales and earnings guidance Thursday after better-than-expected first-quarter results.