Futures gain after producer prices data eases rate hike fears

Written by on January 13, 2022

January 13, 2022

By Bansari Mayur Kamdar

(Reuters) -U.S. stock index futures rose on Thursday after weaker-than-expected producer price data eased concerns about a faster pace of interest rate hikes from the Federal Reserve, while Delta Air Lines led gains among carriers on strong earnings.

The producer price index increased 0.2% last month, below the 0.4% expectation, after advancing 0.8% in November, the Labor Department said on Thursday. In the 12 months through December, the PPI surged 9.7%, below the 9.8% forecast of economists polled by Reuters, after rising 9.6% in November.

“They’re high and the numbers are certainly not good, but they were expected,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. “So the market is not really worried and it’s not selling off on that.”

The figures further boosted stock index futures after Wall Street eked out slim gains on Wednesday when consumer prices data largely met market expectations despite hitting a 40-year high.

Delta Air Lines gained 2.4% in premarket trading after beating estimates for fourth-quarter earnings and said it has recovered nearly 80% of its 2019 pre-pandemic level revenue.

Shares of peers American Airlines and United Airlines advanced 1.5% each.

More U.S. companies will report results on the final quarter of 2021 in the coming weeks. Year-over-year earnings growth from S&P 500 companies were expected to be lower in the quarter than it was in the first three quarters but still strong at 22.4%, according to IBES data from Refinitiv.

JPMorgan Chase is due to report on Friday along with Citigroup and Wells Fargo. Results from big technology and other mega-cap companies start next week, with Netflix due to report on Jan. 20.

“Last time financials booked a lot of reserves, thinking at the time that people were not going to pay them back but things have improved a lot now,” said Fall Ainina, deputy director of research for James Investment.

Banks have been among the best performers since the start of the new year, with retail investors also raising their exposure to bank stocks ahead of the earnings announcements, according to Vanda Research’s weekly report on retail flows.

Also on the radar, Fed Governor Lael Brainard will appear at a Congressional hearing later in the day for her nomination as deputy chair.

At 8:55 a.m. ET, Dow e-minis were up 111 points, or 0.31%, S&P 500 e-minis were up 11.25 points, or 0.24%, and Nasdaq 100 e-minis were up 58.75 points, or 0.37%.

Wells Fargo followed Goldman Sachs, JPMorgan and Deutsche Bank in forecasting an aggressive tightening of U.S. monetary policy in the coming months and estimating the Fed to raise interest rates four times this year.

“Even if we get four it will still be a small number, even if people get really excited, we are still at zero now,” said James Investment’s Ainina.

Chipmakers Nvidia, Analog Devices, Texas Instruments and Advanced Micro Devices gained up to 1% after Taiwanese chip giant TSMC said it expects strong growth in the coming years due to booming semiconductor demand.

(Reporting by Bansari Mayur Kamdar and Shreyashi Sanyal in Bengaluru; Additional reporting by Devik Jain; Editing by Maju Samuel)


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