A look at the day ahead in U.S. and global markets from Mike Dolan.
A surge of 'soft landing' hopes for the U.S. economy on Thursday got sideswiped overnight after a dire industry readout from chipmaking giant Intel decimated its stock price after the bell.
Intel dropped a whopping 10% after the firm said it expects to lose money in the current quarter, surprising investors with a bleak outlook for both the PC market and its key data center division.
"We stumbled... we lost share, we lost momentum," said Chief Executive Pat Gelsinger as the company flagged a glut of chips in the PC industry, cratering demand for consumer electronics, and a drop in recession-wary business investment.
"We expect some of the largest inventory corrections literally that we've ever seen in the industry," he told Reuters later.
While the chip world and Intel may have peculiar post-pandemic issues, the question of mounting inventories was one worrying feature of Thursday's otherwise surprisingly upbeat U.S. GDP report for the final quarter of last year.
While annualised Q4 economic growth came in at a brisk 2.9%, the Commerce Department showed half of that came from a sharp rise in inventory held by businesses, some of which is likely unwanted and which may now be run down while production is scaled back.
That may cast a pall on the new year outlook, but it should also encourage hopes of discounting and disinflation, with Friday's release of the Federal Reserve's favoured inflation measure - the Personal Consumption Expenditures (PCE) index - now a key focus ahead of next week's Fed policy meeting.
Annual 'core' PCE inflation is expected to have slowed to 4.4% last month, the lowest in more than a year, from 4.7% in November.
With the Fed decision now firmly in view and widely expected to conclude another downsizing of its interest rate hikes to just 25 basis points, persistent tightness in the U.S. labour market is one area that will keep the central bank on alert.
A separate report from the Labor Department showed initial claims for state unemployment benefits fell last week to the lowest level since April 2022.
The flipside to such low prevailing jobless readings is a wave of company announcements on planned staff cuts - something that was initially concentrated in the digital and tech universe, but is now broadening out to other sectors.
Toymaker Hasbro said on Thursday it would cut about 15% of its global workforce this year, eliminating about 1,000 full-time positions globally and joining a growing list of firms shedding jobs, including big industrial names this week such as Dow and 3M. Hasbro stock fell 5% in afterhours trade.
American Express and Colgate-Palmolive are among the companies reporting on Friday.
After 1%-plus gains for the major Wall St indices on Thursday to new year highs, stock futures are back in the red ahead of Friday's open. U.S. Treasury yields and the dollar were a touch higher.
Overseas, Japan's yen firmed after news that annual core consumer prices in Tokyo, a leading indicator of nationwide trends, rose 4.3% in January, the fastest in nearly 42 years.
While the data keeps the Bank of Japan under pressure to phase out its ongoing monetary stimulus and cap on government borrowing rates, Prime Minister Fumio Kishida insisted a return to deflation can't be ruled out as domestic demand remains weak.
British finance minister Jeremy Hunt meantime promised to tackle the country's weak productivity with post-Brexit finance reforms to boost growth, but signalled he would stick to tax rises as one way to tackle high inflation. "The best tax cut right now is a cut in inflation," he said.
Shares in India's Adani Enterprises sank 20% on Friday as a scathing report by a U.S. short seller triggered a rout in the conglomerate's listed firms, casting doubts on how investors will respond to the company's record $2.45 billion secondary offer.
Seven listed companies of the Adani conglomerate - controlled by one of the world's richest men, Gautam Adani - have lost a combined $48 billion in market capitalisation since Wednesday.
U.S. bonds of Adani firms also fell after Hindenburg Research flagged concerns in a Jan. 24 report about debt levels and the use of tax havens.
Key developments that may provide direction to U.S. markets later on Friday:
* U.S. Dec Personal Consumption Expenditure (PCE) price index and personal income/spending, Dallas Fed's Dec Trimmed Mean PCE Price Index, Dec pending home sales, Kansas City Fed's Jan services index, University of Michigan's Jan consumer sentiment and inflation expectations
* U.S. corp earnings: American Express, Chevron, HCA Healthcare, Colgate-Palmolive, Roper Technologies, Charter Communications
(By Mike Dolan, editing by XXXX email@example.com. Twitter: @reutersMikeD; Editing by Jan Harvey)