Private credit market raises concerns; US PCE and GDP data upcoming — Market overview

Investing.com - Major U.S. stock index futures rose as the market awaits the release of key inflation and economic growth data. Following an announcement from industry giant Blue Owl Capital, concerns about the health of the private credit sector have surfaced, while oil prices stabilized amid ongoing U.S.-Iran tensions.

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1. Futures Rise

On Friday, U.S. stock index futures gained as traders prepared for a series of critical economic data releases and assessed new worries about the health of the private credit market.

As of 03:09 AM Eastern Time (16:09 Beijing Time), Dow futures were up 54 points, up 0.1%; S&P 500 futures rose 14 points, up 0.2%; Nasdaq 100 futures increased by 57 points, up 0.2%.

Major Wall Street indices declined in the previous trading session, weighed down by ongoing Middle East geopolitical tensions and some disappointing corporate earnings reports, which Vital Knowledge analysts described as “disappointing.” Retail giant Walmart also noted a sharp acceleration in general merchandise inflation amid the full-scale imposition of tariffs in the U.S. and issued a conservative outlook for the year, leading to a drop in its stock price.

Tech giant Apple also declined, dragging the benchmark S&P 500 lower.

Meanwhile, Federal Reserve Board member Stephen Miran downplayed his long-standing dovish stance on interest rates. After the Fed’s January meeting minutes showed several participants warning of potential rate hikes in the coming months, Miran made these comments. Vital Knowledge analysts said these remarks fueled speculation that borrowing costs could “further diverge” from President Donald Trump’s desire for rapid, large-rate cuts. They added that this increases the risk of confrontation between the White House and the Fed.

2. Concerns in the Private Credit Market

Most attention on Thursday focused on the private credit market, after large private loan firm Blue Owl Capital announced that investors would no longer be able to request quarterly redemptions of fixed amounts of funds.

Instead, Blue Owl will decide how much to return to investors each quarter.

Blue Owl’s stock price fell, along with peers like Ares and Blackstone, reflecting growing concerns that potential issues may be lurking in this often opaque private credit industry, which has lent trillions of dollars to companies in recent years.

There is also concern about how exposed lenders are to software stocks, which have been under pressure due to fears that emerging artificial intelligence models could cause disruptions.

Former PIMCO CEO Mohamed El-Erian pondered on social media whether Blue Owl’s redemption changes could be seen as a “canary in the coal mine” moment, similar to the start of the financial crisis nearly two decades ago.

“There are many questions worth considering, first whether the investment phenomena in developed markets (rather than emerging markets) have already gone too far (short answer: yes), and then the approaches taken by specific companies (there are many differences, but all face ‘lemon market’ risks),” El-Erian wrote.

3. Oil Prices Stabilize

Oil prices stabilized, potentially marking their first weekly increase in three weeks, amid escalating U.S.-Iran tensions raising concerns over supply disruptions in the Middle East.

Brent crude futures were flat at $71.66 per barrel, while U.S. WTI crude futures fell 0.1% to $66.35 per barrel.

Both contracts hovered near their highest levels since early August, with weekly gains expected to exceed 6%.

Tensions remain high, as President Donald Trump warned on Thursday that if Iran does not reach an agreement on its nuclear program within 10-15 days, “very bad things” could happen, raising the possibility of military action.

Any escalation involving Iran, a major OPEC oil producer, could threaten oil flows through the Strait of Hormuz, a critical chokepoint for about one-fifth of global oil transportation.

4. PCE Data Coming Soon

On Friday, economic data will continue to be a focus for investors, with one of the most anticipated releases being the monthly Personal Consumption Expenditures Price Index.

The core PCE index, a key inflation indicator closely watched by the Federal Reserve, is expected to rise 0.3% month-over-month in December, up from 0.2% in November. The Bureau of Economic Analysis projects the year-over-year increase at 3.0%, up from 2.8%.

Last week’s data showed that the overall Consumer Price Index (CPI) increased at a slower-than-expected pace, boosting bets that the Fed might cut rates earlier than June. Earlier this week, strong employment data had also fueled expectations that after several rate cuts in 2025, the Fed would not resume easing until later this year.

5. U.S. GDP Data Coming Soon

Meanwhile, preliminary U.S. economic growth data is expected to show a slowdown in the October-December quarter.

Economists forecast that the quarter-over-quarter growth rate for the world’s largest economy in late 2024 will be 2.8%, down from 4.4% in the third quarter.

From July to September, consumer spending—long a major driver of U.S. economic activity—continued to be a key contributor to growth. A narrowing trade deficit also played a role, partly driven by President Trump’s comprehensive tariff policies.

While these figures appear strong, many Wall Street analysts note that the economy has taken on a “K-shaped” pattern, with high-income households and corporations contributing significantly. Meanwhile, low-income Americans continue to face relatively high prices and sluggish hiring, and small businesses are dealing with rising import costs and a reduced supply of low-cost labor due to ongoing immigration crackdowns.

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