S&P 500 futures attempt for 5-day successful streak as merchants await CPI report

What’s driving markets

The focus for merchants on Thursday would be the September U.S. client costs index report, due for launch at 8:30 a.m. Eastern.

Investors hope the inflation information will affirm worth pressures proceed to ease and so help the narrative that the Federal Reserve has completed elevating rates of interest on this cycle — a situation that has seen benchmark bond yields fall sharply of late and the inventory market rally.

Economists count on headline annual CPI will dip from 3.7% in August to three.6% final month, and for core inflation, which excludes unstable objects reminiscent of meals and power, to fall from 4.3% to 4.1%.

The 10-year Treasury yield
BX:TMUBMUSD10Y
has dived greater than 30 foundation factors since hitting a 16-year excessive round 4.86% on Friday, as quite a few Fed officers have urged there could also be little must hike borrowing prices once more this 12 months.

Minutes of the Fed’s September coverage assembly, revealed Wednesday, confirmed members have been “highly uncertain” concerning the future path of the financial system and determined to proceed in a cautious meeting-by-meeting method to interest-rate coverage.

“Ahead of this important [CPI] print, markets this week have responded more to central bank speak than the tragic events in the Middle East, but the two combined have provided the perfect conditions for bonds to rally,” mentioned Jim Reid, strategist at Deutsche Bank.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, mentioned: “The probability of a no rate hike in November jumped above 90% after the Fed minutes, whereas this probability stood at around the 70% level at the beginning of this week. U.S. fed funds futures price in more than 70% for a no hike in December as well, whereas this probability closer to 50/50 a few days ago.”

These shifts have helped push the S&P 500 fairness benchmark to a acquire of two.8% during the last 4 classes, as traders additionally eye the start-proper on Friday of the third-quarter company earnings season.

Aggregate S&P 500 earnings are forecast to have risen 1.3% from a 12 months in the past, in line with Tajinder Dhillon, senior analysis analyst at Refinitiv, who additionally notes that the market has grown extra optimistic about company income of late.

“For the first time in six quarters, earnings growth expectations have risen heading into the quarter (Q3: +0.3 percentage points). The prior six quarters saw an average decline of 4.2 percentage points heading into earnings season.,” Dhillon wrote in a notice.

“This sets up another opportunity for Q3 to deliver a better-than-expected quarter if history repeats itself following a very strong earnings surprise rate in Q1 and Q2, which were the highest since 2021,” he added.

Other U.S. financial updates set for launch on Thursday embody the weekly preliminary jobless claims report at 8:30 a.m. Boston Fed President Susan Collins will discuss concerning the financial outlook at 4 p.m.