Futures rise, setting stocks on firm ground for the week

Published 16/02/2018 in Uncategorized

Futures rise, setting stocks on firm ground for the week
Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., February 15, 2018. REUTERS/Lucas Jackson

(Reuters) – U.S. stock futures rose on Friday, set to build on a rally that has lasted five straight days as investors shrug off inflation fears and focus on growth in the economy and corporate profits.

At 6:56 a.m. ET, Dow e-minis 1YMc1 were up 40 points, S&P 500 e-minis ESc1 had added 6.25 points and the Nasdaq 100 e-minis NQc1 rose 19.5 points.

The benchmark S&P 500 index’s .SPX 4.3 percent gain since Monday has put it on track for its best week since January 2013. Its pullback from last week’s sell-off has been accompanied by low volatility, encouraging economic data and corporate reports.

Shares of Coca-Cola (KO.N) rose 1.85 percent in premarket trading after the soda maker’s cost-saving initiatives helped its beat fourth-quarter profit estimates.

Deere & Co (DE.N) rose 1.44 percent after the tractor maker reported higher quarterly sales.

Beside recent strong quarterly earnings, investor sentiment has also got a boost from expectations that more growth is still to come due to newly-implemented corporate tax cuts and plans to increase infrastructure spending.

Nearly 77 percent of the S&P 500 companies that reported fourth-quarter results so far have topped earnings estimate, above the 72 percent beat-rate in the past four quarters.

Many companies have boosted their forecasts and analysts now expect S&P 500 companies to increase their earnings per share in 2018 by 18.9 percent, according to Thomson Reuters I/B/E/S.

After falling by more than 10 percent from their record highs on Jan. 26 on concerns about rising borrowing costs due to a pick up in inflation, the S&P has gained 5.8 percent since last Friday.

Some traders have said the market was also reassured by a decline in the CBOE Volatility index .VIX – a measure of implied near-term volatility on the S&P 500, also known as Wall Street’s “fear gauge”.

On Thursday, the VIX dropped below 20 points for the first time since hitting a two-and-a-half-year high of 50.3 last week, while yields on the benchmark U.S. 10-year Treasury bonds hit a more than four-year high of 2.9440 percent.

But, the rising yields this week has not pressured stocks like they did last week. The 10-year yields slipped to 2.8859 percent on Friday.

Economic data on tap includes housing starts data for January, which is forecast to have increased to a seasonally adjusted 1.234 million units. The report is due at 8:30 a.m. ET.

Later in the day, a preliminary reading of the University of Michigan’s consumer sentiment index is expected to show a slight fall to 95.5 in February from 95.7 in the previous month.

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