U.S. stock index futures rose in choppy trading on Thursday as data showing a moderation in inflation added to hopes that the Federal Reserve will start slowing the pace of future rate hikes.
The Labor Department’s report showed U.S. consumer prices grew 6.5% on an annual basis in December, in line with expectations, from a 7.1% rise last month.
Markets initially spiked lower after the data, but quickly reversed to edge higher as investors assessed the numbers. Consumer prices unexpectedly fell for the first time in more than 2-1/2 years in December, suggesting that inflation was now on a sustained downward trend.
“The month-over-month numbers tell us inflation is definitely moderating, but maybe not at the pace the markets were hoping for,” said Darrell Cronk, chief investment officer at Wells Fargo Wealth & Investment Management.
Consumer prices had been on a downward trend after peaking in June, with markets hoping that continued moderation in the latest inflation reading may persuade the Fed to soon signal a pause in its rate-hiking cycle.
Such optimism has supported equities in 2023, with the S&P 500 up 3.4% so far this year after logging its steepest decline since 2008 in the previous year due to the Fed’s rapid interest rate hikes.
Some Fed policymakers earlier this week signaled the possibility of a 25-basis point hike during the February meeting, if the much-awaited consumer prices data further adds to evidence of a cooling economy.
This week marks the start of the quarterly earnings season, with big banks expected to report lower profits, while overall S&P 500 earnings are expected to decline year-over-year, according to Refinitiv.
At 8:58 a.m. ET, Dow e-minis were up 138 points, or 0.4%, S&P 500 e-minis were up 17.25 points, or 0.43%, and Nasdaq 100 e-minis were up 45 points, or 0.39%.
Bed Bath & Beyond Inc climbed 19.8% in premarket trading, after rising for three consecutive sessions, despite bleak quarterly results.
Netflix Inc gained 1.9% as Jefferies raised its rating on the company’s shares to “buy”, while Tesla Inc dipped 0.4% following a report that the electric-car maker delayed plans to expand its Shanghai factory.
American Airlines Group Inc advanced 4.5% after raising its fourth-quarter profit forecast on strong demand for travel during the key holiday season.
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