Wall Street’s main indexes eyed a higher open on Wednesday after a bigger-than-expected drop in December retail sales supported hopes of smaller rate hikes by the Federal Reserve, while gains in Tesla were set to boost the Nasdaq.
A reading from the Commerce Department showed retail sales fell 1.1% in December, compared with expectations of a 0.8% drop.
Another report showed U.S. producer prices rose less than expected year-on-year in December, adding to evidence of a moderation in inflation.
“These are good numbers from the standpoint that inflation has rolled over and the Fed has accomplished its objective,” said Thomas Hayes, chairman at Great Hill Capital LLC in New York.
Traders’ bets of a 25-basis point rate hike by the Fed in February rose to 94.7% after the data, from 90.6% previously, with the terminal rate now seen at 4.88% by June.
Focus also remained on the earnings season as it gathers pace, to gauge how corporate America has fared against high interest rates and a challenging demand environment.
Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.4% for the quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of 2023.
Earnings from big U.S. banks were a mixed bag, with many stockpiling rainy-day funds preparing for a looming recession.
Among stocks, Tesla Inc (TSLA.O) rose 3.8% in premarket trading, set to rise for the second straight session, as analysts noted the electric-vehicle maker’s recent price cuts to top models gave it a competitive edge.
At 8:50 a.m. ET, Dow e-minis were up 50 points, or 0.15%, S&P 500 e-minis were up 13.5 points, or 0.34%, and Nasdaq 100 e-minis were up 63 points, or 0.54%.
U.S. stock markets logged strong gains in 2023 after a dismal last year on hopes that a moderation in inflationary pressures and some signs of cooling in the labor market could give the Fed cover to dial down the size of its interest rate hikes.
Wall Street’s main indexes started the holiday-shortened week on a mixed note, with the Dow Jones Industrial Average (.DJI) snapping a four-day winning streak, while the Nasdaq (.IXIC) clocked seven straight sessions of gains, its longest since November 2021.
United Airlines Holdings Inc (UAL.O) rose 3.8% as it forecast at least a four-fold jump in full-year profit and reported fourth-quarter earnings that topped Wall Street estimates on robust travel demand.
IBM Corp (IBM.N) slipped 1.5% after Morgan Stanley downgraded the company’s shares to “equal weight” from “overweight”, citing slowing revenue growth.
PNC Financial Services Group Inc (PNC.N) fell 5.5% after the financial services firm missed estimates for fourth-quarter profit on weakness in its asset management business.