Wall St set for higher open as economic data ease rate jitters

By Sruthi Shankar and Ankika Biswas

(Reuters) – U.S. stock indexes were set for a higher open on Thursday as moderating producer prices and a jump in weekly jobless claims brought relief to investors worried about how far the Federal Reserve will hike interest rates to tame inflation.

Following a selloff in March due to the banking crisis, the benchmark has traded in a tight range this month as investors assessed the path for U.S. interest rates following strong jobs data and signs of cooling inflation.

A Labor Department report showed producer prices rose 2.7% in March, on a year-over-year basis, below economists’ estimates of a 3% rise.

Data also showed that the number of Americans filing new claims for unemployment benefits increased more than expected last week, a further sign that labor market conditions were loosening up.

“This is a good indication that inflation is easing and dropping rather sharply. Jobless claims were also favorable news for the Fed,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“Inflation both at the consumer and producer levels are going south, in the right direction … even though elevated, it’s still good news and this is one big consideration in terms of the Fed ending its tightening cycle.”

Wall Street closed lower on Wednesday after data showed consumer prices rose at a slower-than-expected pace in March, however, core prices remained sticky and supported the case for another 25-basis point rate hike by the Fed in May.

The dollar and Treasury yields slid as investors mostly stuck to expectations of the 25-bps hike after Thursday’s data.

Minutes from the Fed’s latest policy meeting indicated concerns of a recession following the banking sector stress and that several policymakers considered pausing rate hikes last month.

Big U.S. banks JPMorgan Chase & Co (NYSE:), Citigroup Inc (NYSE:) and Wells Fargo (NYSE:) & Co are scheduled to report quarterly results on Friday, and investors will watch them closely for details about the sector’s overall health.

Most Wall Street banks are likely to report lower quarterly earnings and give a dour outlook, with the regional banking crisis and a slowing economy expected to weigh on profitability.

Analysts expect S&P 500 companies to record a profit decline of 5.2% in the first quarter, as per Refinitiv IBES data, in what could be their worst showing since the third quarter of 2020.

Financial companies that are part of the S&P 500 are expected to report a profit growth of 4.3% in the first quarter.

At 8:53 a.m. ET, were up 62 points, or 0.18%, were up 12.5 points, or 0.30%, and were up 60.75 points, or 0.47%.

Delta Air Lines Inc (NYSE:)’s shares gained 2.6% in premarket trading following a higher-than-expected second-quarter profit forecast.

Harley-Davidson Inc (NYSE:) dropped 3.6% after the motorcycle maker said Chief Financial Officer Gina Goetter was leaving the company at the end of April.