U.S. stock futures point to fourth day of gains for Wall Street

U.S. stock futures pointed to Wall Street registering a fourth consecutive day of gains on Monday as traders look ahead to inflation data later in the week.

How are stock index futures trading
  • S&P 500 futures
    ES00,
    +0.48%

    rose 27 points, or 0.7%, to 4095

  • Dow Jones Industrial Average futures
    YM00,
    +0.35%

    gained 161 points, or 0.5%, to 32423

  • Nasdaq 100 futures
    NQ00,
    +0.50%

    eased 88 points, or 0.7%, to 12758

On Friday, the Dow Jones Industrial Average
DJIA,
+1.19%

rose 377 points, or 1.19%, to 32152, the S&P 500
SPX,
+1.53%

increased 61 points, or 1.53%, to 4067, and the Nasdaq Composite
COMP,
+2.11%

gained 250 points, or 2.11%, to 12112.

What’s driving markets

The positive mood from the last several days — which helped Wall Street snap a three-week losing streak — was continuing into the new session. The risk-on tone extended to currencies, where the dollar pulled further back from recent highs.

The latest equity rebound, with the S&P 500 up 4.1% since last Tuesday’s close, suggests investors now appear comfortable with the prospect of a 75 basis point interest rate rise by the Federal Reserve at the conclusion of its meeting on September 21.

There is also hope among bulls that the August U.S. consumer prices report due Tuesday will show a negative reading month-on-month, helping cement expectations that inflation has peaked and the Fed is unlikely to hike borrowing costs beyond the 4% level currently priced by markets. Producer prices data will be released on Wednesday.

“The latest market optimism could be explained by hope to see a second month of softening inflation in the U.S. at this week’s CPI release,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank in a morning note.

“If the data is soft enough, or ideally softer than expected, the equities will likely continue pushing higher this week as well. If, however, the data is not as soft as expected, or worse, if we see a higher figure than last month’s read, then last week’s gains in equities will likely be quickly given back,” Ozkardeskaya added.

Jonathan Krinsky, chief market technician at BTIG, noted that technical factors had helped sentiment but that gains may prove fragile given seasonal headwinds and if the dollar and bond yields did not continue to retreat.

“Bears fumbled on the goal line as they tried to break under 3,900 last week, but the game is not over yet. We see downside risk as we head into the seasonally weak second part of September. While the dollar and rates paused their ascent, there was no reversal and 10-year real rates actually closed at fresh 52-week highs.,” said Krinsky.

The U.S. 10-year Treasury yield
TMUBMUSD10Y,
3.291%

was down 1.4 basis points to 3.301% and the dollar index
DXY,
-0.73%

was off 1% to 107.96.

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