Dow futures jump more than 200 points on stellar earnings, surprise retail sales increase

U.S. stock index futures were higher on Friday as better-than-expected third-quarter earnings reports set the S&P 500 on track for a winning week.

Futures contracts tied to the Dow Jones Industrial Average gained about 240 points, or 0.7%. S&P 500 futures added 0.5% and Nasdaq 100 futures rose 0.2%.

Earnings momentum continued Friday as Goldman Sachs’ third-quarter results beat significantly on the top and bottom line. The bank stock gained roughly 2% in premarket trading.

The stellar report came after earnings beats from other big banks earlier in the week. Financial heavyweights JPMorgan, Bank of America, Morgan Stanley and Citigroup were among the firms topping expectations.

“The banks painted a strong and healthy picture of the US consumer,” noted Edward Moya, senior market analyst at Oanda. “Wall Street can’t turn negative on the economy after seeing reserve releases, moderating trading revenue, mixed loan growth, and a consumer willing to take on debt,” he added.

Retail sales posted a surprise increase in September, rising 0.7%. Economists polled by Dow Jones were expecting a 0.2% decline.

“Despite reports of increasingly widespread shortages, spending on goods apparently held up relatively well,” Capital Economics’ Andrew Hunter said.

The University of Michigan Consumer Sentiment reading will hit the tape at 10 a.m. ET.

The S&P 500 posted its best day since March 5, advancing 1.7% on Thursday as major earnings topped expectations. The Dow gained 1.55%, snapping a four-day losing streak. The 30-stock benchmark had its best day since July 20. The Nasdaq Composite gained 1.73% for its best day since May. All three averages are on track to end the week in the green.

So far, 83% of S&P 500 members that have reported third quarter results have topped EPS expectations, according to The Earnings Scout. Taking into account these results and estimates for those yet to report, third-quarter profit growth increased 25%, according to The Earnings Scout.

A better-than-expected employment reading boosted sentiment on Thursday. Weekly jobless claims for the prior week totaled 293,000, the Labor Department said, which was the first time the reading came in below 300,000 since the start of the pandemic.

Thursday’s gains came despite hot inflation readings, which some have warned could derail the economic recovery. The consumer price index jumped 0.4% in September and 5.4% year over year, according to data from the Labor Department.

“One thing that is clear is that inflation has been persistently higher than expectations over the summer, and the Fed is beginning to take notice,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

“The higher levels of inflation are making it difficult for the Fed to ignore and some market participants have called into question the ‘transitory’ view on inflation…we believe higher levels of inflation are forcing the Fed to bring forward their exit strategy from high levels of monetary stimulus,” he added.