Stocks extended their rebound from oversold levels as traders shrugged off a hotter-than-estimated inflation reading to focus on less hawkish comments from Federal Reserve speakers. Oil fell after an early-week surge.

The S&P 500 rose for a fourth straight session. Megacaps outperformed, with Nvidia Corp. climbing over 2 per cent. Exxon Mobil Corp. led losses in energy shares after agreeing to buy Pioneer Natural Resources Co. German sandal maker Birkenstock Holding Plc slumped in its U.S. debut. Treasury 10-year yields dropped nine basis points to 4.56 per cent. The dollar saw its longest losing streak since March.

Fed Bank of Boston President Susan Collins said officials are taking a more patient approach now that rates are at or near their peak. Her Atlanta counterpart Raphael Bostic said the central bank doesn’t need to keep tightening unless inflation’s descent starts to stall.

Meantime, Governor Christopher Waller noted the Fed can “watch and see” what happens before taking further action with rates as financial markets tighten.

To Krishna Guha at Evercore, Waller’s remarks confirm “a lot has changed” since the Fed’s September gathering, when officials “were not at all focused on the surge in bond yields that had taken place by the time of that meeting.”

Central bank officials agreed last month that U.S. policy should remain restrictive for “some time” to keep cooling down inflation — while noting risks had become more balanced, according to the latest Fed minutes.

“The Fed is near the end of their rate hiking campaign and the events of the past weekend likely solidify this view,” said Jeffrey Roach, chief economist at LPL Financial. “The risk of overtightening appears to be in balance with the risk of insufficient tightening.”

Traders are now awaiting Thursday’s consumer price index, which will come out after data showed a measure of producer prices rose by more than forecast in September amid higher energy costs.

“Tomorrow’s CPI could paint a different picture, but today’s PPI suggests we haven’t seen the end of sticky inflation — and high interest rates,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. “Either way, investors will need to remain patient. Lowering inflation significantly from last year’s highs was one challenge, getting it down to the Fed’s 2 per cent target level is another.”

Wall Street analysts are boosting U.S. earnings forecasts even before results start rolling in, signaling the worst of the profit slump is likely over as ebbing inflation eases the pressure on a broad swath of industries.

That’s pushed an indicator known as earnings-revision momentum — a gauge of upward-to-downward changes to expected per-share earnings over the next 12 months — to roughly positive territory and well over its November 2022 low of negative 70 per cent, according to data compiled by Bloomberg Intelligence. It’s the most positive reading ahead of an earnings season since the first quarter of 2022, with forecasts recently only getting marked up after executives deliver the latest guidance. 

Bank of America Corp. strategists predict U.S. companies will deliver financial results that substantially beat analyst expectations, prompting a boost to their 2023 earnings estimate as a recovery gets underway this reporting season. The expectation is for a “sizable” beat, strategists including Ohsung Kwon and Savita Subramanian wrote.

JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. will kick off the earnings season Friday, with the biggest U.S. banks poised to write off more bad loans than they have since the early days of the pandemic as higher-for-longer interest rates and a potential economic downturn put borrowers in a bind.

Key events this week:

• Japan machinery orders, PPI, Thursday
• Bank of Japan’s Asahi Noguchi speaks, Thursday
• UK industrial production, Thursday
• U.S. initial jobless claims, CPI, Thursday
• European Central Bank publishes account of September policy meeting, Thursday
• Fed’s Raphael Bostic speaks, Thursday
• China CPI, PPI, trade, Friday
• Eurozone industrial production, Friday
• U.S. University of Michigan consumer sentiment, Friday
• Citigroup, JPMorgan, Wells Fargo, BlackRock results as the quarterly earnings season kicks off, Friday
• G20 finance ministers and central bankers meet as part of IMF gathering, Friday
• ECB President Christine Lagarde, IMF Managing Director Kristalina Georgieva speak on IMF panel, Friday
• Fed’s Patrick Harker speaks, Friday

Stocks

• The S&P 500 rose 0.4 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 0.7 per cent
• The Dow Jones Industrial Average rose 0.2 per cent
• The MSCI World index rose 0.5 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at US$1.0613
• The British pound rose 0.2 per cent to $1.2309
• The Japanese yen fell 0.3 per cent to 149.21 per dollar

Cryptocurrencies

• Bitcoin fell 2.4 per cent to $26,760.29
• Ether rose 0.2 per cent to $1,563.01

Bonds

• The yield on 10-year Treasuries declined nine basis points to 4.56 per cent
• Germany’s 10-year yield declined six basis points to 2.72 per cent
• Britain’s 10-year yield declined 10 basis points to 4.33 per cent

Commodities

• West Texas Intermediate crude fell 2.3 per cent to $83.99 a barrel
• Gold futures rose 0.6 per cent to $1,887.10 an ounce