Investing.com — Wall Street Trading Lower

Wall Street is set to trade lower on Friday, ahead of the Federal Reserve's favorite inflation gauge release. Concerns over a potential US government shutdown and threats from Donald Trump regarding tariffs on the European Union have impacted sentiment.

1. Core PCE Index Looms Large

The major central banks have finalized their monetary policies for the year, leaving the core Personal Consumption Expenditures (PCE) price index to be revealed on Friday. This is the Fed's preferred inflation measure.

Upside inflation risks are on the Fed's radar, following a significant increase in US consumer prices last month. The Fed has revised its forecast for future rate cuts from four to two for 2025 in response. A stronger than expected core PCE index could have a significant market impact.

Analysts expect the November core PCE index to rise to 2.9% year-over-year, up from 2.8%, with a monthly increase projected at 0.2%.

2. Futures Slip on Potential Government Shutdown

US stock futures fell in anticipation of the core PCE release, amidst concerns about a possible government shutdown.

As of 04:50 ET (08:50 GMT), Dow futures were down 145 points (0.4%), S&P 500 futures fell 27 points (0.5%), and Nasdaq 100 futures dropped 165 points (0.8%).

Investor sentiment weakened after a Trump-backed Republican measure to fund the government failed, leading to worries of a partial shutdown beginning Friday.

The main indices are headed towards sharp weekly losses, with the S&P 500 and Dow down over 3%. Other economic data to watch includes the University of Michigan’s consumer sentiment index.

3. US Government Shutdown Draws Near

A partial shutdown looms after a spending bill supported by Donald Trump was rejected. Republican leaders failed to gain the necessary support for the agreement, resulting in a potential government closure with funding expiring at midnight Friday.

Goldman Sachs predicts each week of shutdown could reduce quarterly GDP growth by 0.15 percentage points.

4. Trump Threatens EU with Tariffs

Donald Trump has warned the European Union of tariffs unless it addresses its trade deficit with the US by purchasing more oil and gas. Trump has previously threatened tariffs on other trading partners, and this could escalate into a trade war.

In 2022, the US had a significant goods and services trade deficit of $131.3 billion with the EU.

5. Oil Heads for Weekly Losses

Crude prices decreased on Friday, bracing for significant weekly losses due to a stronger dollar and fears of diminishing demand.

US crude futures (WTI) fell by 2.3% to $68.97 a barrel, while Brent crude dropped by 0.6% to $72.47 a barrel. The stronger dollar and slow demand signals have pressured oil prices downward.