Wall Street quickly turned from losses to gains early Friday after government data showed that inflation eased for the first time this year.
Futures for the S&P 500 were 0.3% higher before the bell, while futures for the Dow Jones Industrial Average ticked up about 0.2%.
Markets cheered after the Fed's preferred measure of inflation showed prices cooled slightly last month, to a gain of 2.8% year over year, the same as March.
That same gauge accelerated in the first three months of 2024, disrupting what had been a steady decline and torching any notion that the Fed would start cutting rates early this year.
The U.S. central bank began hiking rates in March of 2022 in a bid to extinguish the four-decade high inflation that came as the economy rebounded from the COVID-19 recession of 2020.
With inflation remaining stubbornly above the Fed’s 2% target level, Wall Street traders now expect just one rate cut this year. And that's far from certain, with investors placing the likelihood of a cut in November at 63%, down from 77% last week.
In early trading Friday, fashion retailer Gap Inc. jumped more than 25% after it posted nearly triple the per-share profit Wall Street was expecting.
Ulta Beauty, the cosmetics retailer, also reported strong first-quarter profits, sending its shares up 10% before the bell.
On the losing side was the computer and server maker Dell, which saw its shares tumble nearly 17% before markets opened, even as its sales and profit came in ahead of Wall Street targets. Some analysts suggested that sales of the Texas company's servers for use in the artificial intelligence market underwhelmed investors, who had sky-high expectations because of the recent frenzy around AI.
Broadly, the three major U.S. indexes — the S&P 500, Dow and Nasdaq — are on track to finish May with gains following April's wipeout. With the unofficial end of earnings season this week, investors and analysts will fixate on economic data while trying to guess if and when the Fed could potentially cut rates.
In Europe at midday London's FTSE 100 gained 0.4%, while the CAC 40 in Paris and Germany's DAX were largely unchanged.
In Asian trading, Tokyo's Nikkei 225 added 1.1% to 38,487.90 as reports circulated of plans for major investments by government-backed pension funds and other big institutional investors.
Semiconductor maker Tokyo Electron shed 2.5%.
The Nikkei financial news outlet said Japan is preparing to put nearly 100 trillion yen ($638 billion) more public money into the markets, following the lead of the Government Pension Investment Fund.
Chinese shares lost ground late in the day following an official survey showed Chinese factory activity weakening in May on slowing export orders, putting additional pressure on an economy already burdened by a prolonged crisis in the property industry.
Hong Kong's Hang Seng index shed 0.8% to 18,079.61 and the Shanghai Composite index gave up 0.2% to 3,081.81.
Australia's S&P/ASX 200 rose 1% to 7,701.70 and the Kospi in Seoul was flat at 2,6536.52.
Taiwan's Taiex dropped 0.9% as shares in the market's biggest heavyweight, computer chip maker Taiwan Semiconductor Manufacturing Corp., fell 2%, tracking declines for other major technology companies.
In the bond market, the yield on the 10-year Treasury ticked down to 4.52% early Friday from 4.55% late Thursday, while the 2-year yield dipped to 4.91% from 4.93% late Thursday.
U.S. benchmark crude oil rose 16 cents to $78.07 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude oil, the international standard, gained 31 cents to $82.19 per barrel.
The U.S. dollar rose to 157.16 Japanese yen from 156.82 yen. The euro climbed to $1.0853 from $1.0834.
On Thursday, Nvidia’s 3.8% decline helped pull the Nasdaq composite down 1.1%, while the S&P 500 sank 0.6% even though the majority of stocks within the index and across Wall Street were higher. The Dow dropped 0.9%.
