US Futures Drop as Inflation Data Cements Fed Hike:

• azon cloud warning takes shine off robust tech reports
• Core PCE Inflation reinforces case for another Fed rate hike

US equity futures retreated as a rally in tech stocks lost steam and persistent inflationary pressures cemented expectations for higher rates in the US and Europe. Treasuries advanced. Contracts on the S&P 500 and the Nasdaq 100 slipped as Amazon.com Inc.’s warning after the market close on growth in its key cloud computing business soured the mood. Treasuries recouped some of Thursday’s losses, with the 10-year benchmark yield falling about seven basis points. The policy-sensitive two-year rate remained above 4%. Markets remain on edge, as data on inflation reinforced expectations of a Federal Reserve interest rate hike next week, and possibly in June.

The personal consumption expenditures price index excluding food and energy, one of the Fed’s preferred inflation gauges, rose 0.3% in March for a second month. Compared with a year ago, the measure was up 4.6%.

“What looks like sticky contemporaneous inflation remains an issue, preventing the market from getting too carried away on the rate-cutting phase to come in subsequent quarters,”’ wrote Padhraic Garvey, head of global debt and rates strategy at ING Financial Markets. In Europe, an uptick in consumer-price gains points to more rate increases by the European Central Bank, which also meets next week.  Principal’s Shah Sees Prospect for Fed Hikes Beyond May Seema Shah, chief global strategist at Principal Asset Management, sees stagflation as “by far” the worst case scenario for risk assets as says there is a “meaningful chance” for further rate hikes from the Federal Reserve beyond May. She speaks with Lisa Abramowicz on “Bloomberg Surveillance.” Analysts at Berenberg said equities’ strong year-to-date gains had been driven by resilient earnings and receding pessimism on economic growth, but “risks are skewed to the downside over the coming months, with headwinds from tighter policy, margin headwinds and US recession.” On Thursday, US equities enjoyed the biggest daily gain since January, thanks to solid earnings from technology firms, including Meta Platforms Inc. and Intel Corp. That was before the Amazon warning and disappointing results from Snap Inc. and Pinterest.