Nasdaq Gains Momentum on Inflation Data Relief and Rate Cut Speculation

The Nasdaq is poised for a higher opening on Thursday, buoyed by softer-than-expected producer prices data, alleviating concerns about stubborn inflation and bolstering expectations of Federal Reserve rate cuts later this year.

While futures for the S&P 500 and the Dow Jones suggest a subdued start, the Nasdaq's prospects appear brighter.

The Labor Department's report revealed a modest 0.2% increase in the Producer Price Index (PPI) for final demand in March, slightly below economists' forecasts. Annually, the index rose to 2.1%, falling short of estimates. This unexpected moderation in price pressures eased investor worries and maintained hopes for potential Fed rate adjustments.

Paul Nolte, senior wealth advisor and market strategist for Murphy & Sylvest, noted the surprise in producer prices, considering the recent surge in commodity and input prices. He emphasized that these developments could influence the upcoming Personal Consumption Expenditures (PCE) report.

Additionally, initial jobless claims for the week ending April 6 came in lower than expected at 211,000, signaling ongoing strength in the labor market.

The previous session witnessed a sharp market sell-off following higher-than-anticipated consumer price data for March, prompting concerns that the Fed might delay rate cuts until September. Minutes from the central bank's March meeting revealed officials' apprehensions regarding inflation progress, raising the possibility of prolonged monetary tightening.

In response, several brokerages revised their rate-cut projections, with UBS Global Wealth Management anticipating rate cuts to commence in September instead of June, while BNP Paribas forecasts the first cut in July.

Government bond yields retreated from Wednesday's highs, with the 10-year note easing to 4.5375%. Market sentiment regarding monetary policy easing has tempered, with expectations for rate cuts in 2024 diminishing to approximately 45 basis points, down from around 150 basis points at the year's outset.

Investor focus remains on commentary from Richmond Fed President Thomas Barkin and Atlanta Fed President Raphael Bostic, offering insights into the central bank's rate path.

The upcoming first-quarter earnings season gains momentum on Friday, with major banks like JPMorgan Chase & Co, Citigroup, and Wells Fargo set to report quarterly results.

In premarket trading, biotech firm Alpine Immune Sciences surged 36.6% after Vertex Pharmaceuticals announced its acquisition for about $4.9 billion. Meanwhile, Albemarle gained 1.4% following an upgrade from Berenberg, and CarMax declined 9.0% due to lower fourth-quarter profit. Industrial supplies maker Fastenal also fell 5.0% after missing revenue and profit estimates for the first quarter.

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