Futures rise ahead of key inflation data as bank fears ebb

[March 30, 2023]  By Amruta Khandekar and Ankika Biswas

(Reuters) -U.S. stock index futures rose on Thursday as fears of a banking crisis eased, while investor focus turned to key consumer spending data for cues on the Federal Reserve's policy path.

The banking turmoil, which started earlier this month with the collapse of two regional U.S. lenders, had sparked concerns about a broader financial crisis and led to a dramatic shift in monetary policy expectations from the Fed.

The KBW regional banking index has gained 1% so far this week while the S&P 500 banks index that houses major lenders has jumped nearly 5% during the same period, as fears of a bank contagion recede amid a lack of fresh triggers within the sector.

Investors await the February reading of personal consumption expenditures (PCE) price index, the Fed's preferred inflation gauge, on Friday. January figures showed a sharp acceleration in consumer spending.

"The data we are starting to see is looking less rosy and even though inflation is falling painfully slowly, it is moving in the right direction," said Stuart Cole, head macro economist at brokerage Equiti Capital.

"This is increasingly starting to point to the Fed being close to halting its policy of raising rates."
 

Traders' bets are still tilted towards a pause in rate hikes in May, with rate cuts expected soon after that.

Investor sentiment also got a boost from upbeat outlooks by Micron Technology and other companies on Wednesday that allayed concerns about the health of the U.S. economy and powered gains in Wall Street's main indexes.

Major tech and growth names such as Microsoft, Tesla and Amazon.com, which were among the biggest boosts to equities in the previous session, rose between 0.5% and 1% before the opening bell.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 29, 2023. REUTERS/Brendan McDermid

Final estimates for quarterly U.S. economic growth are expected to confirm gross domestic product likely remained unchanged at 2.7% in the fourth quarter. The data is due at 8:30 am ET.

A separate report due at the same time is expected to show jobless claims rose last week from the week before, hinting at some softening in the labor market.

Investors will also parse comments from Boston Fed President Susan Collins, Minneapolis Fed President Neel Kashkari and Richmond President Thomas Barkin later in the day for clues on the central bank's monetary policy plans following the banking crisis.

At 6:42 a.m. ET, Dow e-minis were up 189 points, or 0.57%, S&P 500 e-minis were up 22.25 points, or 0.55%, and Nasdaq 100 e-minis were up 65.5 points, or 0.51%.

Among other stocks, Faraday Future Intelligent Electric Inc jumped 25.3% premarket after the company said it has started production of its first luxury electric car after a months-long delay.

Streaming platform Roku Inc gained 3% on plans to cut about 200 jobs.

Charles Schwab Corp dropped 1.6% after Morgan Stanley downgraded the investment bank's stock to "equal weight" from "overweight".

(Reporting by Amruta Khandekar and Ankika Biswas; Editing by Anil D'Silva and Vinay Dwivedi)

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