By Sruthi Shankar and Johann M Cherian
(Reuters) - Wall Street was set to open higher on Thursday, as bank stocks rose after major lenders cleared the Federal Reserve's annual stress test, while economic data pointed to a resilient U.S. economy in the face of aggressive interest rate hikes.
Shares of Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS) and Wells Fargo (NYSE:WFC) rose between 1.5% and 1.9% in premarket trading after the banks sailed through the Fed's annual health check, which showed they have enough capital to weather a severe economic slump.
Bank of New York Mellon (NYSE:BK) and Charles Schwab (NYSE:SCHW) rose 1.9% and 2.4%, respectively.
"The market is getting a sense of relief because the tests are critical. The banks passing with flying colors in what would be near depression conditions tells us that the fears regarding banks were probably exaggerated," said Thomas Hayes, chairman at Great Hill Capital.
The S&P 500 and Dow closed lower on Wednesday after Fed Chair Jerome Powell said he did not see inflation falling to the central bank's target rate "this year or next year" and that most of the policymakers expect the Fed will need to raise interest rates at least twice by the year's end.
Meanwhile, data showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, which indicated labor market strength.
A separate report showed the U.S. gross domestic product increased at a 2.0% annualized rate in the first quarter, up from the 1.3% pace reported previously.
Following the hawkish views and data, traders were pricing in an 84.3% chance the Fed would hike interest rates by 25 basis points to 5.25%-5.50% range in its July meeting, according to CME Group's (NASDAQ:CME) Fedwatch tool, up from 74.4% a week earlier.
"Economic data continues to beat on most fronts and it's hard to see a scenario where one or two hikes would derail the economy. But the odds of the hikes are much less than Powell is projecting so tech stocks are benefiting," said Great Hill Capital's Hayes.
Apple (NASDAQ:AAPL) inched 0.2% higher after closing at a record high on Thursday and edging closer to a $3 trillion market capitalization.
Shares of other high-growth companies such as Tesla (NASDAQ:TSLA) and Nvidia rose more than 1% each.
The Personal Consumption Expenditure index (PCE), the Fed's preferred inflation gauge, for May will be released on Friday. Economists polled by Reuters expect core rates to remain steady at 4.7%.
At 8:43 a.m. ET, Dow e-minis were up 118 points, or 0.35%, S&P 500 e-minis were up 11.25 points, or 0.25%, and Nasdaq 100 e-minis were up 32 points, or 0.21%.
Micron Technology (NASDAQ:MU) rose 2.4% after the chipmaker beat estimates for third-quarter results, powered by demand for its memory chips.
Occidental Petroleum (NYSE:OXY) advanced 1.3% after Berkshire Hathaway (NYSE:BRKa) Inc said it added more shares of the oil firm, boosting its stake to above 25%.