Updated at 9:00 am EST
U.S. equity futures traded edged higher Friday, following on from a wild session on Wall Street yesterday that saw the biggest trough-to-peak swing for the Dow in more than two years, triggered by a hot inflation reading that has essentially cemented the case for big Fed rate hikes between now and the end of the year.
The catalyst for yesterday’s rally, which included a 1,500 point swing for the Dow and the biggest intra-day move for the S&P 500 in nearly a year, remains uncertain, but stock investors appeared to be caught off-guard by the early morning move, which followed September inflation data showing a spike in core consumer price pressures and a faster-than-expected headline rate of 8.2%.
Bank of America’s closely-tracked Flow Show report suggests investors were long huge amounts of cash heading into yesterday’s inflation reading, while the market itself was significantly oversold, with around two-thirds of Nasdaq stocks trading 33% below their 52-week highs.
The September inflation reading, which included a headline rate of 8.2%, has effectively locked-in the prospect of a 75% point rate hike next month from the Federal Reserve, which would take the Fed Funds rate to a range of between 3.75% and 4%, with bets on a follow-on move of the same size to close out the year running at around 62%.
Last night’s rally also sparked solid gains for stocks in most global markets overnight, with Japan’s Nikkei 225 surging 3.25% and the region-wide MSCI Asia index rising 1.66%.
Stocks in Europe were also firmly higher, with London’s FTSE 100 up 0.4% amid reports that the U.K. government of new Prime Minister Liz Truss will scrap some of its planned tax cuts and borrowing increases, a move seen as easing tensions in the country’s bond market, which has been subject to Bank of England intervention for the past two weeks.
On Wall Street, investors head into the Friday session with their eyes on big bank earnings and what could be a key reading of retail sales strength for the month of September, with data arriving at 8:30 am Eastern time.
The Commerce Department said sales were flat to the upwardly-revised August tally of $684 billion as a slower decline in gas prices and surging inflation in rent, travel and healthcare clipped the pace of growth in discretionary spending.
Futures contracts tied to the S&P 500 are indicating a 43 point opening bell bump, while those linked to the Dow Jones Industrial Average are priced to add another 343 points to last night’s 828 point surge, the biggest single-day gain since November of 2020. The tech-focused Nasdaq is priced for a 130 point gain.
Benchmark 10-year note yields were holding steady at 3.869% in early New York trading while the dollar index, which tracks the greenback against a basket of its global peers, was marked 0.6% higher at 113.057.
A busy session of earnings has a series of stocks on the move Friday, although the most active pre-market name was Beyond Meat (BYND) , which slumped 4.6% after it slashed its 2022 sales forecast and unveiled a raft of job cuts.
Wells Fargo (WFC) posted weaker-than-expected third quarter earnings as it set aside nearly $800 million in credit reserves, but a big jump in net interest income helped boost the lender’s overall revenues firmly past Street forecasts.
JPMorgan Chase (JPM) posted better-than-expected third-quarter earnings, while setting aside nearly a $1 billion to cover potentially bad loans in a weakening domestic economy, as income from rising interest rates offset a slump in global dealmaking.