Stock futures ticked up early Friday morning as investors turned their attention to big bank earnings after the major averages staged a historic turnaround rally.
Futures tied to the Dow Jones Industrial Average added 45 points, or 0.15%. S&P 500 futures inched higher by 0.17%, and Nasdaq 100 futures gained 0.14%.
In regular trading, the Dow ended up 827 points after being down more than 500 points earlier in the day. The S&P 500 rose 2.6% to break a six-day losing streak. The Nasdaq Composite jumped 2.2%.
The moves followed the release of the consumer price index, a key U.S. inflation reading that came in hotter than expected for the month of September. Initially, this weighed on markets as investors braced themselves for the Federal Reserve to continue with its aggressive rate-hiking plan. Later, however, they shrugged off those worries.
“The best excuse for today’s bounce is ‘sell the news’ paired with highly negative sentiment/positioning,” said Ross Mayfield, investment strategy analyst at Baird. “The market had already fallen six straight days, de-risking the report a bit, and September CPI likely doesn’t change the near-term path of the Fed (which was already quite hawkish).”
Still, persistent inflation remains a problem for the Fed and for investors’ worries around the central bank’s policy tightening.
“The turnaround is a welcome respite for investors, but the market still requires greater clarity on the extent of tightening still ahead,” said Brian Levitt, global market strategist at Invesco. “The focus remains on the pace of inflation and the underlying strength in the jobs market. A market rally will likely commence when the market believes that a Fed tightening pause is in the offing.”
There’s some hope among investors that third-quarter earnings can perhaps come to the market’s rescue like it did in the previous reporting period.
While some companies have been releasing their quarterly results, big banks will get the ball rolling on Friday. JPMorgan Chase, Wells Fargo, Morgan Stanley and Citigroup are all scheduled to report before the bell. U.S. Bancorp and PNC Financial are also on the schedule, along with UnitedHealth.
There’s still more economic data this week, too. September’s retail sales will come out at 8:30 a.m. ET. Later in the morning, investors are looking forward to the latest consumer sentiment figures from the University of Michigan.