US stock futures rally as investors look past rising inflation and focus on earnings season

Stocks rose Wednesday, despite inflation reaching a 13-year high. EMMANUEL DUNAND/AFP via Getty Images
The US stock market rallied on Thursday, despite the fact that inflation hit a 13-year high.

Investors were focusing on the third quarter earnings with a host of large banks due to report on Thursday.

Oil prices rose elsewhere as the IEA stated that the energy crisis could increase demand by 500,000 barrels per day.

The US stock futures rose on Thursday, as earnings season picked-up pace, even though inflation rose and the Federal Reserve moved closer to reducing its support for economy.

S&P 500 futures were 0.65% higher, Nasdaq 100 futures 0.84% higher, and Dow Jones futures rose 0.5% after US stocks ended a three-day losing streak.

In Asia overnight, China's CSI 300 index slipped 0.54%, but Tokyo's Nikkei 225 climbed 1.46%. Early trading saw Europe's Stoxx 600 index rise by 0.83%.

Despite falling in the early part of the session, US stocks closed in the green Wednesday. This was due to traders digesting a key inflation report as well as minutes from the Fed's latest meeting.

Consumer price index inflation increased to 0.4% month-on-30 and 5.4% year on-year, which is a 13-year record. This was a new high. Prices have risen around the globe due to persistent supply-chain disruptions and an energy crunch.

According to Fed minutes, the central bank may begin "tapering" bond purchases in November and December as it responds to high inflation and an economic recovery.

The chances of a taper increasing, US bond yields remained unchanged and major stock markets closed higher. Analysts believe investors were already prepared for strong inflation and a Fed move.

"There was not a murmur in markets after the release of the [Fed] minutes," Mike Owens, global trader at Saxo Markets said. "Markets are now more prepared for the Fed's signals in the past few months to reduce the emergency pandemic assistance they have been providing until this point," said Mike Owens, global sales trader at Saxo Markets.

On Thursday, the yield on the US Treasury's 10-year Treasury note fell slightly to 1.539%. It had been above 1.6% for the previous week. Prices are inversely related to bond yields.

Continue reading: The head for investment strategy at iShares US' $2.3 trillion US company explains the 2 market themes that will determine Q3 earnings season - as well as shares why'stagflation concerns' are exaggerated

Investors turned their attention to the third quarter earnings season. JPMorgan posted profits that exceeded estimates Wednesday due to a surge of dealmaking. As earnings pace picks up, major lenders Bank of America and Wells Fargo, Morgan Stanley, Citigroup, and Morgan Stanley will report on Thursday.

Many analysts believe that corporate earnings will outperform expectations, despite rising costs and the Delta coronavirus wave.

Mark Haefele (chief investment officer at UBS Global Wealth Management) stated that earnings growth and the "beat" rate will likely fall significantly in the third quarter.

We still expect 30% growth in earnings for the third quarter. This is a 5% increase. While pent-up demand should drive revenue growth and pricing power should offset inflationary pressures, operating leverage and pricing power should be able to offset inflationary pressures.

Oil prices rose elsewhere in the markets as an increase in global energy costs pushes consumers towards fossil fuels. According to the IEA, switching to oil could increase demand by 500,000 barrels per day from March to March, compared to normal conditions. Brent crude oil rose 1.32% to $84.26 per barrel, while WTI crude was $81.47 per barrel.

The price of bitcoin rose 1.2% to $57.677 in the crypto world. After a steady rise in recent weeks, the world's largest cryptocurrency plunged sharply on Wednesday.