U.S. stock futures signal fresh 15-month high amid cooling inflation optimism

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U.S. stock futures show Wall Street pushing to fresh highs for the year on Thursday, as traders welcome cooling inflation and attention turns to the corporate earning season. On Wednesday, the Dow Jones Industrial Average DJIA rose 86 points, or 0.25%, to 34347, the S&P 500 SPX increased 33 points, or 0.74%, to 4472, and the Nasdaq Composite COMP gained 158 points, or 1.15%, to 13919. What’s driving markets Equity bulls continue to be energized by Wednesday’s news that U.S. headline inflation has fallen to its lowest level in more than two years, bolstering the chances that the Federal Reserve is near the end of its campaign of interest rate hikes. As implied borrowing costs dip further — with the benchmark 10-year Treasury yield BX:TMUBMUSD10Y, which started the week near 4.1%, now at 3.83% — the S&P 500 and Nasdaq Composite indices look set to extend their march to fresh 15-month highs, having already gained 16.5% and 33% respectively, for the year to date. “Markets have put in sturdy performance thanks to an encouraging U.S. CPI report that boosted hopes of a soft landing for the U.S. economy…the good news is the disinflation process looks increasingly benign, especially when set against a U.S. economy characterized by low unemployment and solid growth,” said Stephen Innes, managing partner at SPI Asset Management. Mohamed El-Erian, adviser to Gramercy and Allianz, agreed that easing inflation had made investors more optimistic about U.S. growth. Source: Twitter Indeed, there is a broad ‘risk on’ tone across global markets. For example, the Hang Seng HK:HSI in Hong Kong, whose currency peg with the U.S. dollar makes it particularly sensitive to Fed policy, rose 2.5% on Wednesday, despite news that Greater China exports fell in June by their most since the start of the COVID pandemic. Extending the rally now likely depends on how the second-quarter corporate earnings season is received. PepsiCo PEP and Delta Air Lines DAL are among those publishing their numbers on Thursday, but the season really kicks into gear on Friday when big banks such as JPMorgan Chase JPM, Citigroup C and Wells Fargo WFC present their figures. Overall S&P 500 earnings are expected to fall by 6.4%, according to Refinitiv, though much of this is because of large losses for energy companies. Source: Refinitiv U.S. economic updates set for release on Thursday include the weekly initial jobless claims and June producer prices data, both at 8:30 a.m. Eastern. And there is more Fedspeak, with San Francisco Fed President Daly giving a TV interview at 11:10 a.m., and Fed Governor Waller speaking at 6:45 p.m.