Benzinga - by Shanthi Rexaline, Benzinga Editor.
Traders remain optimistic as stock futures point to a higher open on Thursday, following four consecutive sessions of gains. The upcoming release of the consumer price inflation report for September, scheduled before the market opens, is likely to influence direction. Delta Air Lines, Inc. (NYSE:DAL) reported strong quarterly results, bolstering expectations of healthy corporate profits this earnings season.
The continued decline in bond yields and the recent pullback in oil prices provide further motivation to stay invested in stocks.
Cues From Wednesday’s Trading:
The stock market is anticipating a potential pause, as evidenced by the ongoing retreat in Treasury yields. Despite a report indicating larger-than-expected increases in producer prices, the major indices started the day on a positive note. However, optimism waned throughout the morning session.
Before the release of the September Federal Open Market Committee meeting minutes, the indices were trading below the unchanged line. They later reversed course as traders absorbed the hawkish message conveyed by the minutes, ultimately closing higher.
The major indices ended the day at their highest levels in approximately three weeks. On the contrary, small-cap stocks faced downward pressure.
Sectors such as communications services, IT, real estate, and utilities led the S&P 500’s best-performing sectors, while energy, consumer staples, and healthcare experienced selling pressure.
US Index Performance On Wednesday
| Index | Performance (+/-) | Value |
| Nasdaq Composite | +0.71% | 13,659.68 |
| S&P 500 Index | +0.43% | 4,376.95 |
| Dow Industrials | +0.19% | 33,804.87 |
| Russell 2000 | -0.15% | 1,773.30 |
Analyst Color:
Although traders are factoring in a Fed pause and likely rate cuts next year, Morgan Stanley’s Lisa Shalett said higher interest rates may not go away. She attributed the deduction to two factors, namely a resilient economy and a tight labor market keeping inflationary pressure alive and the likely lukewarm reception to the huge debt issued by the U.S. government.
“With deficit sustainability remaining an issue, the price of money likely stays elevated,” she said.
Shalett expects longer-term government bond yields to normalize somewhere between 4.5% and 5.5%. “Our logic is that the post-COVID U.S. economy looks more like the post-World War II period than the era of secular stagnation, with growth and inflation around 2.5% to 3% driving investors to demand rates in this higher range,” she added.
Futures Today
Futures Performance On Thursday
| Futures | Performance (+/-) |
| Nasdaq 100 | +0.40% |
| S&P 500 | +0.42% |
| Dow | +0.37% |
| R2K | +0.64% |
In premarket trading on Thursday, the SPDR S&P 500 ETF Trust (NYSE:SPY) rose 0.44% to $438.24 and the Invesco QQQ ETF (NASDAQ:QQQ) gained 0.40% to $372.71, according to Benzinga Pro data.
Upcoming Economic Data:
The Bureau of Labor Statistics will release the consumer price inflation report on September 8:30 a.m. EDT. After producer prices are surprised by the upside, traders will likely look for inflation insights from the retail price inflation report. Economists, on average, expect consumer and core consumer prices to increase at a monthly rate of 0.3% each. In August, the two measures were at 0.6% and 0.3%, respectively. On a year-over-year basis, consumer and consumer prices may have increased 3.6% and 4.1%, respectively, in September. This compares to August’s increases of 3.7% and 4.3%.
The Labor Department will also release the jobless claims report for the recent reporting week at 8:30 a.m. EDT. Economists expect the number of individuals claiming unemployment benefits to come in at 210,000 for the week ended Oct. 7 compared to 207,000 in the week ended Sept. 30.
The Energy Information Administration will release its weekly petroleum status report at 11 a.m. EDT. The report is delayed by a day from its customary schedule due to the Columbus Day holiday on Monday.
The Treasury will auction four- and eight-week bills at 11:30 a.m. EDT and 30-year bonds at 1 p.m. EDT.
Atlanta Fed President Raphael Bostic, a member of the rate-setting committee, is due to speak at 1 p.m. EDT. The Fed president relayed dovish comments in his public appearance earlier this week.
Stocks In Focus:
- Ford Motor Co. (NYSE:F) fell over 2% in premarket trading after the United Auto Workers union extended the strike to the company’s Kentucky plant, which is Blue Oval’s biggest plant.
- Delta Air Lines stock moved up nearly 1.5% despite the company trimming its full-year outlook on higher fuel costs. The airline reported better-than-expected third-quarter results.
- Fastenal Co. (NASDAQ:FAST) and Domino’s Pizza, Inc. (NYSE:DPZ) are among the other companies due to release their quarterly results ahead of the market opening.
Crude oil futures rebounded by 0.89% to $84.23 in early European session on Thursday following Wednesday's 2.88% plunge.
The benchmark 10-year Treasury note fell 0.039 percentage points to 4.558% on Thursday.
The Asian markets rallied strongly, encouraged by the prospects of the U.S. Fed relenting, although the Indian and New Zealand markets ended modestly lower for the session. European stocks advanced and were solidly higher in late-morning trading.
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