U.S. stock futures steady amid earnings anticipation and inflation surprises

Investors await JPMorgan, Citigroup results later

By Ahmed Azzam | @3zzamous | 13 October 2023

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  • U.S. stock futures steady before big bank earnings.

  • Eyes on earnings: Banks may see $5.3B in charge-offs.

  • China's consumer prices flat.

U.S. stock futures displayed resilience in early Friday trading, with Wall Street bracing for a wave of corporate earnings reports, most notably from banking giants JPMorgan, Wells Fargo, and Citigroup, scheduled for release later in the global trading day. Investors remained cautious following a tumultuous session on Thursday.

In yesterday's regular trading session, the Dow Jones Industrial Average took a 0.51% hit, the S&P 500 suffered a 0.62% loss, and the tech-heavy Nasdaq Composite slumped 0.63%. Notably, nine out of the 11 S&P sectors experienced a downward trajectory, painting a gloomy picture.

The market sentiment was largely influenced by unexpected hot inflation figures, as the U.S. consumer price index (CPI) for September surged by 0.4%, albeit a slight moderation from August's 0.6% leap, but exceeding market expectations of 0.3%. This inflationary surge has inevitably jolted Treasury yields, sending the benchmark 10-year Treasury yields soaring nearly 10 basis points to a notable 4.695%.

Corporate market highlights

In the realm of corporate news, Ford Motor Company witnessed a 2% decline following reports that UAW members initiated a strike at the company's largest manufacturing plant. Meanwhile, Delta Air Lines, despite posting results that outperformed expectations, found itself down 2.3%. Domino's Pizza managed to buck the trend, closing 0.1% higher despite reporting somewhat underwhelming results.

Banking giants await

As the anticipation builds for the quarterly earnings reports, Wall Street is closely monitoring JPMorgan, Wells Fargo, and Citigroup. These financial powerhouses are expected to follow in the footsteps of Bank of America, which released its earnings earlier this week, hinting at a combined net charge-off figure of around $5.3 billion. Such a statistic would mark the highest since 2020 and reaffirm the ongoing trend of increasing loan losses. JPMorgan, in particular, is expected to stand out due to its acquisition of First Republic, making it an NII outlier.

Fed's take on yields and inflation

Federal Reserve's Susan Collins weighed in on the recent surge in Treasury yields. She suggested that if these elevated yields persist, it might alleviate the need for further tightening of monetary policy in the foreseeable future. Collins also noted that the latest CPI data serves as a stark reminder that "restoring price stability will take time." Furthermore, she highlighted the resilience of the U.S. GDP, which could necessitate an extended period of higher interest rates.

China's economic pulse

Turning our attention to the global stage, China's consumer prices bucked expectations by stagnating in September 2023. Market forecasts had anticipated a 0.2% gain, but the reality flat at 0%, following a slowdown in food prices, largely attributed to abundant supply in anticipation of the Golden Week holiday. On the flip side, non-food costs continued to rise. Meanwhile, China's factory gate prices, while still declining, showed signs of easing the 12-month descent.