U.S. stock futures are indicating that Wall Street is heading towards new highs for the year, thanks to easing inflation concerns and the start of the corporate earning season.
How are stock-index futures performing?
- S&P 500 futures (ES00) are up 14 points or 0.3% at 4522.
- Dow Jones Industrial Average futures (YM00) have gained 67 points or 0.2% at 34617.
- Nasdaq 100 futures (NQ00) have advanced 88 points or 0.6% at 15533.
Market Recap
On Wednesday, the Dow Jones Industrial Average (DJIA) rose 86 points or 0.25% to reach 34347. The S&P 500 (SPX) increased by 33 points or 0.74% to 4472, and the Nasdaq Composite (COMP) gained 158 points or 1.15% to 13919.
Optimism in the Equity Market
Equity bulls are fueled by the recent news that U.S. headline inflation has dropped to its lowest level in over two years. This development enhances the likelihood that the Federal Reserve is nearing the end of its interest rate hike campaign.
As borrowing costs decrease, with the benchmark 10-year Treasury yield (TMUBMUSD10Y) dropping from around 4.1% to 3.83%, the S&P 500 and Nasdaq Composite indices are poised to continue their ascent towards fresh highs, having already achieved impressive gains of 16.5% and 33% respectively so far this year.
Sturdy Performance in Markets Driven by Positive U.S. CPI Report
The markets have demonstrated a strong performance thanks to an encouraging U.S. Consumer Price Index (CPI) report. This positive outcome has boosted hopes for a smooth landing of the U.S. economy. As Stephen Innes, the managing partner at SPI Asset Management, highlighted, the disinflation process looks increasingly favorable, especially when considering the low unemployment rate and solid growth of the U.S. economy.
Investor optimism regarding U.S. growth has been further reinforced by the easing inflation, according to Mohamed El-Erian, an adviser to Gramercy and Allianz. This sentiment is reflected across global markets, contributing to a broad ‘risk-on’ tone.
For instance, despite news of a significant decline in Greater China exports in June, the Hang Seng in Hong Kong, which has a currency peg with the U.S. dollar and is sensitive to Federal Reserve policy, rose by 2.5% on Wednesday.
The continuation of this rally now hinges on the reception of second-quarter corporate earnings. On Thursday, companies such as PepsiCo and Delta Air Lines will publish their numbers. However, the real excitement begins on Friday when major banks like JPMorgan Chase, Citigroup, and Wells Fargo present their figures.
Although Refinitiv predicts an overall 6.4% decline in S&P 500 earnings, it’s worth noting that much of this projection is driven by significant losses in the energy sector.
U.S. Economic Updates
On Thursday, various important economic updates will be released in the United States. These updates include the weekly initial jobless claims and June producer prices data. The release time for both of these reports is set at 8:30 a.m. Eastern.
Fedspeak
In addition to the economic data releases, there will also be some notable Fedspeak scheduled for Thursday. San Francisco Fed President Daly will be giving a TV interview at 11:10 a.m., providing insights into the current economic situation. Later in the day, at 6:45 p.m., Fed Governor Waller will be speaking, presenting his perspectives on the economy.
Stay tuned for these updates to gain valuable insights into the state of the U.S. economy.
