Stock futures opened little changed Wednesday night as investors digested a host of mixed corporate earnings and reassurances from top central bank officials that the latest spike in inflation would likely prove to be temporary.
Contracts on the S&P 500 continued to follow the flat line after the index hit a record high in the intraday market during Wednesday’s regular session. Dow and Nasdaq futures also traded little changed.
The major banks that have reported second-quarter results so far have had mixed results, with revenues and net interest income coming under pressure as interest rates fell from a March peak to date.
Remarks on Wednesday from Federal Reserve Chair Jerome Powell to Congress also cast doubt on the strength of the economic recovery, with the Fed leader saying the U.S. economy was a long way from reaching the central bank’s threshold. of “substantial further progress” in the recovery. Energy and financial cyclical sectors, which could benefit from a pick-up in economic activity, underperformed during Wednesday’s session.
“Lately, banking stocks and the financial sector have been slowing down a bit after what’s been a pretty strong part of the year for that industry. And I think there’s a few things going on,” Jason Ware, Albion Financial Group Partner and chief investment officer, Yahoo Finance told Wednesday. “First of all, the elements that propelled bank stocks and other groups in that cyclical and value trade have started to slow down a bit as the market begins to digest what is now known as peak growth.”
“Second, we have interest rates that have fallen lately,” he added. “And of course banks are very closely tied to what happens to interest rates.”
The decline in government bond yields, with the 10-year benchmark yield falling almost 7 basis points to fall back below 1.4%, also coincided with Powell’s comments redouble his belief that recent inflationary pressures will eventually ease uiteindelijk. In congressional testimony, the Fed leader pointed to the reopening-related categories of goods and services that have seen the biggest rise in inflation, such as used car and truck prices, as evidence that the price hike could pass later this year. to go.
But temporary or not, last month’s inflation data is much hotter than expected. Tuesday’s consumer price index registered the fastest annual increase since June 2008. And on Wednesday, the Bureau of Labor Statistics’ June Producer Price Index posted a 7.3% year-over-year increase, the fastest increase ever recorded in data dating back to 2010.
“Multi-year inflation spikes and how the Fed might respond to them is what the markets are targeting, especially as they involve asset purchases,” High Frequency Economics’ Rubeela Farooqi wrote in a note. “[Powell] said the timing and composition of tapering will be something officials will discuss at upcoming meetings.”
“In short, there was no change in Mr Powell’s message, even though inflation remains positive and job growth is picking up,” Farooqi added.
6:01 p.m. ET Wednesday: Stock futures embrace the flat line
Markets were traded here on Tuesday evening
S&P 500 futures (ES=F): 4.366.5, -1.25 points (-0.03%)
Dow futures (YM=F): 34,798.00, -18 points (-0.05%)
Nasdaq futures (NQ=F): 14,895.25, +3.5 points (+0.2%)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck