Wall St set to slip at open as investors assess inflation data

WASHINGTON DC: Wall Street's main indexes were set to open slightly lower in choppy trading on Friday after data showed inflation cooled further in November, but not enough to discourage the Federal Reserve from driving interest rates to higher levels next year.

Futures swung between gains and losses in thin trading before Christmas after a Commerce Department report showed U.S. consumer spending barely rose in November, while inflation cooled further. The personal consumption expenditures (PCE) price index, the Fed's preferred inflation gauge, rose 0.1% last month after climbing 0.4% in October. In the 12 months through November, the PCE price index increased 5.5% after advancing 6.1% in October.

"The good news is the PCE coming down to a 5.5 number. But again, still above what the Fed is expecting and part of the reason why we've seen a pop in rates indicating that the Fed is not yet done with their rate-increasing cycle," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. "The equity markets have it wrong that they think the Fed is going to stop and eventually cut interest rates later in 2023. And right now I don't see that happening anytime soon."

The previous session saw a selloff on Wall Street sparked by data that indicated a resilient American economy, that could push the central bank to keep hiking rates for longer. Market participants stuck to their expectations of a 25-basis point rate hike by the Fed in February, but see the terminal rate hitting 4.9% in May 2023 versus 4.8% before the data on Friday.

Investors have been jittery since last week as the Fed remains stubbornly committed to achieving the 2% inflation goal and projected it would continue raising rates to above 5% in 2023, a level not seen since 2007. The benchmark S&P 500, with a near 20% fall this year, is on track for its biggest yearly decline since the 2008 financial crisis. The tech-heavy Nasdaq has shed about 33% this year and the Dow 9%.

"It looks like a disappointing December will cap off a disappointing year for equities, unless we get a last-minute post-Christmas Santa surge which seems unlikely at this stage," said Victoria Scholar, head of investment at Interactive Investor. Other data sets that investors will closely monitor on Friday include new home sales and University of Michigan's consumer sentiment for assessing the state of the U.S. economy, due after the opening bell.

At 9:06 a.m. ET, Dow e-minis were down 25 points, or 0.08%, S&P 500 e-minis were down 7.5 points, or 0.19%, and Nasdaq 100 e-minis were down 26.75 points, or 0.24%. Tesla Inc rose 1.5% in premarket trading after Chief Executive Elon Musk said he will not sell any more shares of the electric-vehicle maker for another two years.