Wall Street set for strong open after retail sales data, chip stocks boost

By Lisa Pauline Mattackal and Purvi Agarwal

(Reuters) – U.S. stock indexes were set to rise on Thursday, with an upbeat forecast from TSMC boosting semiconductor stocks, while a bigger-than-expected rise in September retail sales pointed to a strong U.S. consumer.

Profit at Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker, beat market estimates and the company forecast a jump in fourth-quarter revenue, driven by demand for artificial intelligence chips.

The chipmaker’s U.S.-listed shares soared 8.8% in premarket trading, while AI-trade favorite Nvidia (NASDAQ:) gained 3.1%.

Other chip stocks also rose, with Broadcom (NASDAQ:) adding 2.8%, Intel (NASDAQ:) gaining 1.2% and Arm Holdings (NASDAQ:) up 3.8%.

Meanwhile, U.S. retail sales rose 0.4% in September, on a monthly basis, beating the 0.3% forecast from economists polled by Reuters.

Weekly jobless claims were also lower than expected, at 241,000 for the week ended Oct. 12, compared with an estimate of 260,000.

“Retail sales being good continues to show how resilient the U.S. consumer is, given how the U.S. consumer has kind of sent us away from a recession the last couple of years,” said Keith Buchanan, senior portfolio manager at GLOBALT Investments.

“The equity markets will always receive good news on the consumer in a positive way, and I think that’s the case for this morning’s action.”

The data supported the picture of healthy growth in the world’s largest economy, while keeping bets on a 25-basis-point rate cut at the Federal Reserve’s next meeting largely intact, at 92%, according to CME’s FedWatch.

Stocks had advanced in Wednesday’s session, with the notching up its third record close in four sessions, as declines in megacap tech stocks were offset by a rally in small-cap and financial shares.

Futures tracking the economically sensitive small-cap Russell 2000 were flat after the index () closed at its highest level in nearly three years on Wednesday.

Megacap stocks rose after broad declines in the previous session, with Apple (NASDAQ:) rising 0.7% and Microsoft (O:) up 0.6%.

A broadly upbeat start to the third-quarter earnings season, on the heels of strong economic data and the U.S. Federal Reserve kicking off its policy-easing cycle, has propelled the benchmark index to fresh record highs and closer to the psychologically important 6,000 mark.

Still, analysts have flagged increasingly stretched valuations, high earnings expectations and likely volatility ahead of November’s U.S. presidential election as risk factors.

Dow E-minis were up 68 points, or 0.16%, U.S. E-minis were up 26.25 points, or 0.45%, and E-minis were up 173.25 points, or 0.85%.

Elevance Health plummeted 13% after the health insurer slashed its full-year profit forecast.

Peers UnitedHealth (NYSE:) slipped 1.5% and Humana (NYSE:) fell 1.8%.

Insurer Travelers Companies (NYSE:) rose 5% after its third-quarter profit beat Wall Street expectations.

Streaming giant Netflix (NASDAQ:) is scheduled to report third-quarter earnings after the bell. Its shares rose 0.4%.

Federal Reserve Bank of Chicago President Austan Goolsbee is scheduled to speak later in the day and September industrial production figures are also on the deck.

EV-maker Lucid (NASDAQ:) tumbled 18.6% after it said it expects to report a bigger-than-expected loss for the third quarter and announced a public offering of more than 262 million shares.