Stock futures reach 3-week highs after soft European inflation

U.S. stock futures moved to three-week highs Thursday after news of softer European inflation pushed bond yields lower.

The Dow Jones Industrial Average DJIA went up 323 points, or 1%, to 32718, the S&P 500 SPX, increased by 57 points, or 1.42%, to 4028, and the Nasdaq Composite COMP, gained 210 points, or 1.79%, to 11926, was up 323 points, or 1%, on Wednesday.

A day without any unwelcome banking surprises lifted markets as investors went back to a risk-on approach, said Richard Hunter. On Wednesday, the S&P 500 closed back above the 4,000 mark - higher than the level seen before problems at Silicon Valley Bank became known to the market three weeks ago because of concerns about the financial sector.

The CBOE VIX index VIX, a gauge of expected stock market volatility, is close to 19 and close to its lowest for a month.

That suggests confidence is rebuilding among investors who have been shakened by the rapid unfolding of issues concerning a handful of U.S. and European banks, and as expectations for interest rates have swerved in a new direction, said Russ Mould, investment director at AJ Bell.

The lack of banking drama allowed traders to turn their minds back to inflation and the prospects of Federal Reserve monetary policy.

The Federal Reserve preferred measure of inflation is the next economic test to be released on Friday, as the personal consumption expenditures index is released. The number is expected to have moderated further, although still remains at levels that suggest that the Fed's aim of taming inflation has not yet been achieved, Hunter said.

There is a boost to sentiment as a result of better news on Thursday about inflation in Europe.

German 10 year bund yields TMBMKDE 10 Y fell sharply, helping push U.S. peers TMUBMUSD 10 Y, down 3.4 basis points to 3.544%, after data showed a decelerating German regional consumer price rises and Spanish inflation dropping more than expected.

The weekly jobless claims and the second revision of fourth quarter GDP are expected to be released on Thursday, and are due at 8: 30 a.m. Eastern.

There will be a lot of Fed officials making comments. Boston Fed President Collins and Richmond Fed President Barkin are speaking at 12: 45 p.m. with Minneapolis Fed President Kashkari taking the mic at 1 p.m.

The Fed will release its H. 4.1 report on bank lending at 4.30 p.m.