Futures fall as Intel forecast hurts chip stocks; inflation data eyed

(Reuters) – U.S. stock index futures fell on Friday as chip stocks sagged on a dour revenue forecast from Intel, while a crucial inflation print that could influence the Federal Reserve’s monetary policy outlook topped investors’ watch list.

Intel lost 11.3% in premarket trading after forecasting that its first-quarter revenue could miss estimates by over $2 billion, driving 1.2%-2.5% losses in other chip stocks including Nvidia, Advanced Micro Devices, Qualcomm and Micron Technology.

This, along with Tesla’s growth warning on Wednesday, likely deepened worries over rich valuations of heavily weighted megacap companies, also known as the “Magnificent Seven”.

Chipmaking tools maker KLA Corp also shed 6.4% following its third-quarter revenue forecast below estimates.

A recent run in chip and technology stocks helped resurrect a Wall Street rally, which had lost steam at the year’s start after bumper gains in 2023, as investors grappled with growing uncertainty over when interest-rate cuts could arrive this year.

All eyes are now on the core personal consumption expenditures (PCE) price index – the Federal Reserve’s preferred measure of inflation – that is expected to rise by 0.2% month-on-month and by 3% on an annual basis in December. The data is due at 8:30 a.m. ET.

“The bigger picture is that evidence of a durable return in inflation to the Fed’s target is mounting,” Pantheon Macroeconomics analysts said in a note, expecting the inflation data to trigger a 150-basis-point in rate cuts this year.

Traders now see a 90% likelihood of the Fed delivering its first rate cut in May, as per CME Group’s FedWatch Tool, from earlier expectations in March.

The S&P 500 closed at an all-time high for a fifth straight session on Thursday after data reflecting strong fourth-quarter U.S. economic growth shrugged off dire predictions of a recession in the aftermath of the Fed’s rapid rate hikes.

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