Dow futures pare losses after softer-than-expected inflation reading

Stock market futures cut earlier losses on Friday after a key inflation indicator showed better-than-feared price pressures.

Dow Jones Industrial Average futures were down 80 points, bouncing off its lowest level. Contracts tied to the Nasdaq 100 futures fell 1.2% amid a soft earnings report from Amazon, while those tied to the S&P 500 shed 0.7%.

The personal consumption expenditures price index excluding food and energy rose 3.5% in June on a year-over-year basis. It marked a sharp acceleration in inflation but came in slightly below a Dow Jones expectation of a 3.6% jump.

Amazon sank 6.4% in premarket trading after it reported its first quarterly revenue miss in three years and gave weaker guidance. Pinterest fell even further, down 21%, after saying it lost monthly users during the three months ended June 30.

Major averages are still on track for a solid month, although volatility has picked up amid concerns about the economic recovery in the face of the spreading delta variant. The Nasdaq Composite and Dow have added 1.89% and 1.69% respectively in July, while the broad S&P 500 is up 2.83% over the same period. Utilities, health-care, real estate and technology stocks have led the S&P 500 higher for the month, while energy and financials have lagged.

“There has been quite a bit of volatility and price choppiness in the market in recent weeks,” Brian Belski, chief investment strategist at BMO, said in a note. “Increased concerns over the delta variant and its potential implications for reopening momentum seemed to play a key role in the price action, while peak themes related to economic growth, earnings, and policy support also remained an overhang on risk sentiment.”

Procter & Gamble shares rose 1.4% after the consumer giant topped analysts’ estimates for quarterly earnings and revenue. However, the company warned that increasing commodity costs could hit its earnings in the upcoming year.

Shares of online brokerage Robinhood started trading on the Nasdaq at $38 per share on Thursday, but the stock eventually closed its debut session more than 8% lower $34.82 per share. Robinhood shed another 1.5% in premarket trading.

Weaker-than-expected readings on the U.S. economy further eased concerns about the Federal Reserve dialing back asset purchases.

U.S. second-quarter gross domestic product accelerated 6.5% on an annualized basis, considerably less than the 8.4% Dow Jones estimate. Meanwhile, the latest weekly jobless claims also came in higher than expected.

Fed Chairman Jerome Powell on Wednesday noted that while the economy has come a long way since the Covid-19 recession, it still has a ways to go before the central bank considers adjusting its easy-money policies.

“While shy of expectations specifically for Q2 GDP, broadly speaking as Chairman Powell noted yesterday, the recovery has in many ways exceeded even the most optimistic forecasts,” Stifel Chief Economist Lindsey Piegza wrote Thursday afternoon. “With U.S. businesses reopen for business and American consumers anxious to rush into the marketplace and spend, growth in the first half of the year was solid.”