Wall Street bounces back on gains in auto stocks, relief over unchanged rating on Italy

Wall Street was rocked this month by jitters over geopolitical events as well as fears over tariffs, rising wages and borrowing costs. The Dow and the S&P 500 returned to negative territory for the year on Friday.

Wall Street was set to bounce back on Monday from a steep sell-off last week, helped by gains in auto stocks, signs of a recovery in high-growth companies and relief over an unchanged rating on Italy.

Wall Street was rocked this month by jitters over geopolitical events as well as fears over tariffs, rising wages and borrowing costs. The Dow and the S&P 500 returned to negative territory for the year on Friday.

Relief over Italy dodging a ratings downgrade helped U.S. stock futures reverse a decline after data showed China's industrial profit growth slowed for a fifth straight month in September, pointing to cooling domestic demand in the world's second-biggest economy.

The five high-growth FAANG stocks- Facebook Inc, Apple Inc, Netflix Inc, Alphabet, Amazon.com Inc were up between 1.4 per cent and 2.25 per cent in premarket trading.

"News on Europe doing better and a tailwind with the large M&A deal, we have a market that is a bit easier to head into," said Art Hogan, chief market strategist at B. Riley FBR in New York.

The slowdown in China, a major source of income for several American companies, has been a major concern this earnings season, with a slew of corporates from industrials to chipmakers giving discouraging forecasts.

While healthy third-quarter results have pushed up third-quarter profit estimates at S&P companies to 25.2 per cent from 21.8 per cent in the past 10 days, the dour forecast has pulled down the current quarter's growth outlook to 19.5 per cent from 19.9 per cent, according to Refinitiv data.

Carmaker Ford Motor Co rose 4.5 per cent, while General Motors Co gained 4.6 per cent after Bloomberg reported China was planning to cut the tax levied on car purchases by half.

"Investors are coming in today from an oversold market last week," Hogan said. "Markets are set to have a positive reaction to any form of good news."

At 9:10 a.m. ET, Dow e-minis were up 150 points, or 0.61 per cent. S&P 500 e-minis were up 27 points, or 1.01 per cent and Nasdaq 100 e-minis were up 80 points, or 1.16 per cent.

Futures held on to their gains as U.S. consumer spending for September rose in line with expectations and income recorded its smallest gain in more than a year, suggesting a moderation in spending in the future.

Shares of IBM Corp fell 4.7 per cent, the most among S&P 500 components before the opening bell after the company agreed to buy software company Red Hat Inc for $34 billion. Red Hat shares soared 49.1 per cent.

Tesla Inc rose 2.6 per cent as the Times reported that the electric carmaker's third-largest shareholder, Baillie Gifford & Co, would be willing to inject more cash in the company. Another report said German luxury carmaker Daimler AG does not rule out cooperating with Tesla in the future.