US stock futures rally as investors look past rising inflation and focus on earnings season

A stock trader claps at the end of trade at the New York Stock Exchange
Stocks rose on Wednesday despite inflation hitting a 13-year high. EMMANUEL DUNAND/AFP via Getty Images
  • US stock futures rallied Thursday despite inflation hitting a 13-year high and the Fed moving toward tapering.
  • Investors’ focus was on third-quarter earnings, with a slew of big banks due to report on Thursday.
  • Elsewhere, oil prices continued to rise as the IEA said the energy crisis could add 500,000 barrels a day to demand.

US stock futures rose Thursday as earnings season picked up pace, even after inflation climbed and the Federal Reserve edged closer to cutting back its support for the economy.

S&P 500 futures were up 0.65%, Nasdaq 100 futures were 0.84% higher and Dow Jones futures rose 0.54%, after US stocks snapped a three-day losing streak on Wednesday.

In Asia overnight, China’s CSI 300 index slipped 0.54%, but Tokyo’s Nikkei 225 climbed 1.46%. Europe’s continent-wide Stoxx 600 rose 0.83% in early trading.

US stocks ended in the green Wednesday despite falling early in the session as traders digested a key inflation report and minutes from the latest Fed meeting.

Consumer price index inflation rose to 0.4% month-on-month and 5.4% year-on-year, a 13-year high. Persistent supply-chain disruption and an energy crunch have been pushing up prices around the world.

The Fed minutes showed the central bank could begin “tapering” its bond purchases in November or December, as it reacts to strong inflation and a solid economic recovery.

Despite the growing chances of a taper, US bond yields were little changed and major stock markets closed higher. Analysts said investors had already positioned for strong inflation and an imminent Fed move.

“There was barely a murmur from markets following the release of the latest [Fed] meeting minutes,” said Mike Owens, global sales trader at Saxo Markets. “The Fed’s signalling in the last few months has prepared markets for the reduction of emergency pandemic support they have been providing up to this point.”

The yield on the key 10-year US Treasury note was down slightly on Thursday to 1.539%, having started the week above 1.6%. Bond yields move inversely to prices.

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Investors turned their focus to third-quarter earnings season, which kicked off Wednesday with JPMorgan posting profits that topped estimates, driven by a surge in dealmaking. Leading lenders Bank of America, Wells Fargo, Morgan Stanley and Citigroup are due to report Thursday as earnings pick up pace.

Many analysts are bullish about corporate earnings, expecting companies to beat expectations despite the Delta coronavirus wave and rising cost pressures.

“Earnings growth and the ‘beat’ rate will likely drop significantly compared with the second quarter,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

“But we still expect roughly 30% earnings growth in the third quarter, representing a 5% beat. Pent-up demand should drive revenue growth, while pricing power and operating leverage should help offset inflationary pressures.”

Elsewhere in markets, oil prices continued to rise as a global energy crunch pushes users towards the fossil fuel. The IEA said Thursday the switch to oil could boost demand by 500,000 barrels a day until March, compared with normal conditions. Brent crude was up 1.32% to $US84.26 ($AU114) a barrel, while WTI crude was 1.26% higher at $US81.47 ($AU110) a barrel.

In the crypto world, bitcoin was up 1.2% to $US57,677 ($AU78,155). The world’s biggest cryptocurrency fell sharply on Wednesday after a solid rise in recent weeks.