Stock futures headed toward a higher open Thursday morning after a slew of earnings results from the big banks topped expectations.
The S&P 500 was on track for a second straight session of gains. Nasdaq futures outperformed, adding to gains as Treasury yields fell further. The benchmark 10-year yield pulled back further to come in below 1.53% after topping 1.62% just earlier this week.
Bank earnings continued on Thursday with companies including Bank of America (BAC), Wells Fargo (WFC) and Morgan Stanley (MS) posting quarterly results before the opening bell. Bank of America’s profits soared by 58% over last year to $7.7 billion, with this sum boosted by the release of $1.1 billion in credit reserves that had been previously set aside to protect against potential customer defaults. Wells Fargo’s results saw a similar boost from reserve releases, as well as from increased investment banking revenue and consumer credit card-related sales. And Morgan Stanley posted estimates-topping revenue in both its fixed income and equities trading units, with the bank seeing a pick-up in business as market activity related elevated during the quarter.
As earnings season rolls on in the coming weeks, investor focus will be fixed on companies’ commentary around prices increases, supply chain disruptions and labor challenges. All of these factors have been seen as contributing to an earnings slowdown compared to the second quarter. However, how long-lasting these challenges prove to be, and which companies will ultimately be hit the hardest by these factors, has been a central question for investors.
At the macro level, inflation has already lasted for months across various pockets of the economy. The Bureau of Labor Statistics’ (BLS) September Consumer Price Index (CPI) rose 5.4% in September compared to last year, coming in at its fastest pace since 2008. A jump in prices for rent, groceries and energy saw especially notable increases. On Thursday, the BLS is set to release its Producer Price Index (PPI), which is expected to show that selling prices for producers increased by 8.7% in September over last year, or the fastest rate on record in data spanning back to 2010.
Policymakers at the Federal Reserve have largely asserted that inflation during the recovery will prove transitory, and will wane as soon as supply bottlenecks ease. However, the string of above-target inflationary readings this year has called into question officials’ views on short-lived price pressures, and contributed to concerns that the central bank may need to act more quickly and aggressively than so far telegraphed to bring inflationary pressures in line.
“What we are seeing is an economy that continues to run hot,” Jeff Klingelhofer, Thornburg Investment Management’s co-head of investments, told Yahoo Finance Live. “Consumers today still have elevated savings, and they’ll be drawing that down in the months to come. And so really we are absolutely seeing higher wages trickling into the economy … The key to watch will be, as the economy continues to heal, as vaccinations continue to increase and businesses open, whether that trend continues.”
“We’ll be watching those wage numbers exceptionally carefully — they really are the key to trying to figure out where the Fed goes and whether this inflation is transitory in nature,” he added. “But at this point we think it will moderate in the months and quarters to come.”
7:32 a.m. ET Thursday: Stock futures jump as bank earnings top expectations
Here’s where markets were trading Thursday morning:
S&P 500 futures (ES=F): +32.75 points (+0.75%), to 4,387.75
Dow futures (YM=F): +229 points (+0.67%), to 34,486.00
Nasdaq futures (NQ=F): +126 points (+0.85%) to 14,890.25
Crude (CL=F): +$0.97 (+1.21%) to $81.41 a barrel
Gold (GC=F): +$6.10 (+0.34%) to $1,800.80 per ounce
10-year Treasury (^TNX): -2.1 bps to yield 1.528%
6:04 p.m. ET Wednesday: Stock futures little changed
Here’s where markets were trading Wednesday evening:
S&P 500 futures (ES=F): +1 point (+0.02%), to 4,356.00
Dow futures (YM=F): -1 point (-0.00%), to 34,256.00
Nasdaq futures (NQ=F): +10 points (+0.07%) to 14,774.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter