U.S. Futures Rise Ahead of Crucial Inflation Report

U.S. stock index futures rose on Friday as investors awaited a key inflation report, influencing Federal Reserve interest-rate cut expectations. Despite a turbulent month, the Dow saw gains. Focus is now on July's Personal Consumption Expenditure data. Tech giants rose, while Nvidia and Ulta Beauty faced declines.

U.S. stock index futures edged higher on Friday as investors keenly anticipated a pivotal inflation report set to shape the Federal Reserve's interest-rate cut decisions for the remainder of the year.

The global markets are wrapping up a volatile month, initially marred by labor market concerns that hinted at a sharp economic slowdown in early August. The Japanese yen carry trade worsened the instability. However, subsequent positive data, including an upward revision in economic growth, boosted investor confidence, propelling the Dow to record highs and a prospective monthly gain.

All eyes are now on July's Personal Consumption Expenditure data, the Fed's preferred inflation gauge, expected at 8:30 a.m. E.T. This will be the last significant data point before the Federal Reserve's September meeting. Economists forecast a slight increase to 2.6% annually, from 2.5% the previous month.

Investor sentiment has remained optimistic, particularly after Fed Chair Jerome Powell's recent backing for a near-term policy adjustment. Current market expectations, as per CME Group's FedWatch Tool, indicate a 65.5% chance of a 25-basis-point rate cut and a 34.5% chance of a 50-basis-point cut.

Early trading figures were encouraging: at 05:47 a.m. ET, Dow E-minis rose by 65 points (0.16%), S&P 500 E-minis increased by 21.25 points (0.38%), and Nasdaq 100 E-minis climbed by 126.5 points (0.65%).

The tech-heavy Nasdaq and S&P 500 had previously closed lower, weighed down by Nvidia's inability to meet high investor expectations despite positive results. Nvidia rebounded by 1.7% in premarket trading after a 6.4% drop. The S&P 500 is nearing an all-time high with a projected monthly gain of 1.2%, though the Nasdaq dipped by 0.47% in August.

Rate-sensitive tech stocks like Alphabet and Microsoft gained 0.6% and 0.8%, respectively, while Tesla soared by over 1.4%, benefitting from lower Treasury yields. Marvell Technology's robust third-quarter forecast lifted its shares by 9.2%.

Dell Technologies advanced by 6%, upgrading its annual revenue and profit forecasts, driven by demand for AI-optimized servers. Lululemon Athletica climbed 4.4% following a strong second-quarter profit report. Conversely, Ulta Beauty slid 6.2% as it downgraded its annual forecasts due to waning demand.

Later in the day, investors will look at the University of Michigan's final consumer sentiment reading for August. Trading volumes are expected to thin ahead of the Labor Day holiday weekend.

(With inputs from agencies.)