Traders on the floor of the NYSE, October 12, 2022.
Equity futures were higher early Friday morning as investors focused on big bank earnings after major averages staged a historic rally.
Futures linked to the Dow Jones Industrial Average added 198 points, or 0.66%. S&P 500 futures edged up 0.73% and Nasdaq 100 futures gained 0.7%.
In regular trading, the Dow Jones ended up gaining 827 points after losing more than 500 points earlier in the day. The S&P 500 rose 2.6% to snap a six-day losing streak. The Nasdaq Composite jumped 2.2%.
The moves followed the release of the Consumer Price Index, a key reading for US inflation that came in hotter than expected for September. Initially, that weighed on markets as investors braced for the Federal Reserve to continue with its aggressive rate hike plan. Later, however, they ignored these concerns.
“The best excuse for today’s rally is ‘sell the news’ coupled with very negative sentiment/positioning,” said Ross Mayfield, investment strategy analyst at Baird. “The market had already fallen for six straight days, taking the risk off the report a bit, and the September CPI is unlikely to change the Fed’s (already quite hawkish) short-term path.”
Still, persistent inflation remains a problem for the Fed and for investors to worry about central bank policy tightening.
“The turnaround is a welcome respite for investors, but the market still needs more clarity on the extent of the tightening still to come,” said Brian Levitt, global market strategist at Invesco. “The focus remains on the pace of inflation and the underlying strength of the job market. A market rally will likely begin when the market believes a pause in Fed tightening is in sight.”
Investors are hoping that perhaps third-quarter earnings can come to the market’s rescue, as it did in the prior period.
While some companies have released their quarterly results, the big banks will get the ball rolling on Friday. JPMorgan Chase, Wells Fargo, Morgan Stanley and Citigroup are all scheduled to show up before the bell. US Bancorp and PNC Financial are also on the program, as well as UnitedHealth.
There is even more economic data this week as well. September retail sales will be released at 8:30 a.m. ET. Later in the morning, investors are eagerly awaiting the latest consumer sentiment numbers from the University of Michigan.
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