Friday October 14th

U.S. stock markets index futures rose Friday as investors turned their attention to big bank earnings after the major averages staged a historic turnaround rally. Futures tied to the Dow Jones Industrial Average increased 190 points, or 0.63%. S&P 500 futures gained 0.69%, and Nasdaq 100 futures ticked up 0.66%. JPMorgan Chase and Wells Fargo gained after revenue topped expectations. Morgan Stanley reported a profit miss, sending shares down more than 2% in premarket trading. Citigroup also reported a miss in third-quarter profits. Dow member UnitedHealth also reported results that beat Wall Street expectations on Friday, sending shares higher. The outlook for this earnings season is not good. Profit for S&P 500 companies increased a measly 2.4% in the third quarter, according to the latest analyst estimates collected by FactSet, the worst growth since third quarter 2020, the heart of the pandemic. When the third quarter began, earnings growth was expected to be 10% for the period, but rising costs and interest rates have eaten away at companies’ bottom lines. Leading up to the start of this reporting season, 65 S&P companies have issued negative guidance, compared to just 41 giving positive outlooks, FactSet data shows. The reports come a day after the market staged a massive comeback. The Dow ended Thursday’s session up 827 points after being down more than 500 points at the intraday low. The S&P 500 rose 2.6% to break a six-day losing streak, and the Nasdaq Composite jumped 2.2%. The moves followed the release of the consumer price index, a key U.S. inflation reading that came in hotter than expected for the month of September. Initially, this weighed on markets as investors braced themselves for the Federal Reserve to continue with its aggressive rate-hiking plan. Later, however, they shrugged off those worries. Still, persistent inflation remains a problem for the Fed and for investors’ worries around the central bank’s policy tightening. “With core CPI still moving in the wrong direction and the labor market strong, the conditions are not in place for a Fed policy pivot, which would be one of the conditions for a sustained rally in the equity market,” wrote UBS global wealth management chief investment officer Mark Haefele in a Friday note. “Moreover, as inflation remains elevated for longer and the Fed hikes further, the risk increases that the cumulative effect of policy tightening pushes the US economy into recession, undermining the outlook for corporate earnings.” Retail sales in September were flat after ticking up 0.4% in August, the U.S. Census Bureau reported Friday. On the year, retail sales were up 8.2%. Stripping out the price of automobiles, the measure of consumer spending rose 0.1% in September, its first increase since June. “Bottom line, the strength in the US dollar is helping to keep import prices more subdued and as seen in yesterday’s CPI figure, the rate of price increase in core goods continues to moderate,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. Shares in the Asia-Pacific jumped on Friday, taking the lead from Wall Street overnight as investors shook off a strong inflation report. The Nikkei 225 in Japan was 3.25% higher at 27,090.76, while the Topix gained 2.35% to 1,898.19. Japan’s yen plunged to its lowest levels against the U.S. dollar since 1990 overnight before paring losses, and is still trading at 147-levels. The Hang Seng index in Hong Kong was 1.93% higher in the final hour of trade after climbing 3.9% earlier in the session, and the Hang Seng Tech index was up 2.16%. In mainland China, the Shanghai Composite was up 1.84% at 3,071.99 and the Shenzhen Component rose 2.81% to 11,121.72. In Australia, the S&P/ASX 200 gained 1.75% to 6,758.80. South Korea’s Kospi advanced 2.3% to 2,212.55 and the Kosdaq climbed 4.09% to 678.24. Oil prices dipped in a choppy trading session on Friday as global recession fears and weak oil demand, especially in China, outweighed support from a large cut to the OPEC+ supply target. Brent crude futures were down $1.55, or 1.64%, at $93.02 a barrel while U.S. West Texas Intermediate (WTI) crude futures fell $1.63, or 1.83%, to $87.48. Gold slipped on Friday and was on track for a weekly fall, as a stronger U.S. dollar and prospects of more steep rate hikes from the Federal Reserve dented demand for the non-yielding bullion. Spot gold was down 0.6% to $1,655.99 per ounce. Prices have fallen more than 2% so far this week. U.S. gold futures slipped 0.95% to $1,661.1. The U.S. dollar rose 0.7% against its rivals, making bullion more expensive for overseas buyers.