Wall Street set to open higher as data dims rate hike chances

By Tanya Agrawal

REUTERS - U.S. stocks looked set to open slightly higher on Friday as June consumer price index data indicated benign inflation that could test Fed's resolve to raise interest rates for a third time this year, while investors parsed earnings reports from big banks.

Shares of JPMorgan Citigroup and Wells Fargo were lower in premarket trading, after the banks released mixed earnings reports.

Analysts estimate second-quarter earnings for S&P 500 companies rose 7.8 percent from a year earlier, with financials projected to have had the third-best profit growth among sectors, according to Thomson Reuters I/B/E/S.

Bank of America, Goldman Sachs and Morgan Stanley will report results next week.

"While the economy is growing, there is still some room to run," said J.J. Kinahan, chief market strategist at TD Ameritrade.

"People are waiting to hear from CEOs to see if they're optimistic for the rest of the year. Given where valuations are right now, some sell off in the market won't be bad in the short term."

Earnings will be closely watched to see if high valuations are justified in the face of tepid inflation and a recent patch of mixed economic data.

The S&P 500 has been trading at about 18 times earnings estimates for the next 12 months, compared with the long-term average of 15 times.

Dow e-minis were down 4 points, or 0.02 percent, with 17,277 contracts changing hands at 8:39 a.m. ET (1239 GMT).

S&P 500 e-minis were up 0.25 points, or 0.01 percent, with 102,371 contracts traded.

Nasdaq 100 e-minis were up 14.75 points, or 0.25 percent, on volume of 25,803 contracts.

Data showed that in the 12 months through June, the consumer price index (CPI) increased 1.6 percent - the smallest gain since October 2016 - after rising 1.9 percent in May.

Economists polled by Reuters had forecast the CPI climbing 1.7 percent from a year ago.

Other data showed retail sales unexpectedly fell in June for a second straight month, dampening expectations of strong acceleration in economic growth in the second quarter.

Risk sentiment got a boost this week, with the Dow hitting another record close on Thursday, following dovish comments on interest rate hikes from Federal Reserve Chair Janet Yellen.

Yellen said the central bank's further rate hikes could be gradual, given persistently low inflation and that it would be "quite challenging" for U.S. growth to reach a 3-percent target set by President Donald Trump.

(Reporting by Tanya Agrawal; Editing by Arun Koyyur)