US futures bounce back as oil retreats and inflation matches forecasts

What drove the market rebound?

Wall Street futures pointed to a relief rally on Friday, breaking a four-day losing streak that had dragged major indices toward their worst weekly performance in months. The rebound was sparked by a sharp retreat in oil prices and an inflation report that, while still high, contained no nasty surprises for investors.

Futures tied to the S&P 500 and the tech-heavy Nasdaq-100 both gained 0.6% in early trading, while Dow Jones Industrial Average futures climbed 299 points, also a 0.6% rise.

The market had spent the week in retreat, rattled by surging energy costs and climbing Treasury yields. The S&P 500 was on track for its worst weekly drop since June after four consecutive sessions of losses, while the Dow was heading for its steepest weekly decline since March.

The inflation picture and the Fed

The primary focus of the week was the August Consumer Price Index (CPI) report. It showed that US inflation rose 3.4% annually, matching expectations with a 0.4% monthly gain.

While a 3.4% rate keeps the pressure on, the fact that it met forecasts offered immediate comfort to a nervous market. The reading followed a hotter-than-expected Producer Price Index report earlier in the week, which had raised fears that inflation was starting to accelerate again.

The data will be the final major piece of economic evidence the Federal Reserve considers before its policy meeting on September 15-16. With inflation still well above the central bank’s 2% target, traders are weighing whether policymakers will push ahead with another interest rate hike.

Earlier in the week, the European Central Bank raised its key deposit rate by 25 basis points to 2.5%, signalling that global central banks remain highly sensitive to persistent price pressures.

Oil prices pull back from the brink

The stock market's recovery was closely tied to a slide in crude oil. Brent crude, the global benchmark, dropped $4 to trade at $104.14 a barrel, having surpassed $108 earlier in the week. US crude had also recently broken past the symbolic $100-a-barrel threshold.

Even with Friday's slide, oil prices remained up roughly 9% for the week. Energy markets are tightly wound due to deepening tensions in the Middle East, where Iran-backed Houthi militants in Yemen have reportedly advanced toward Red Sea coastal areas near the Bab el-Mandeb Strait. Any threat to the shipping corridor risks further disrupting global supplies.

The spike in crude has already hit consumers, with US diesel prices climbing above $6 a gallon for the first time. The high prices have begun to dent demand, prompting the International Energy Agency to lower its consumption forecasts and warn that usage may need to fall further.

Corporate movers and a gold drop in Delhi

In corporate trading, Oracle shares jumped 7% before the bell as the company’s heavy investment in data centre projects began to show returns. Conversely, Adobe shares dropped more than 4% after its fourth-quarter revenue outlook missed investor expectations. Shares of online vehicle auction platform ACV Auctions soared 44% following news of a $1.9 billion takeover offer from Copart.

Meanwhile, in physical assets, gold prices in Delhi experienced a sharp correction. The price of 99.9% pure gold tumbled by Rs 2,700 to Rs 1,55,900 per 10 grams, inclusive of taxes.

The drop in Delhi came as local buyers took profits after a recent rally, even as international spot gold prices rose 1.15% to $4,366.58 an ounce. Saumil Gandhi, a senior analyst at HDFC Securities, noted that gold remains under pressure globally and is on track for its third consecutive weekly decline as expectations of higher US interest rates remain strong.