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Stock futures traded sideways Monday morning at a muted start to the week, as traders await a key monetary policy decision from the Federal Reserve.
Contracts on the S&P 500 gained just 0.1% after the index closed at a record high on Friday. Dow futures hugged the flat streak, while Nasdaq futures outperformed with a gain of about 0.3%, with two hours until the opening bell. Treasury yields soared, and the benchmark 10-year yield settled well below 1.5%.
US stocks are hovering near record levels, buoyed by a combination of rebounding economic activity and corporate earnings, and a host of continued support from fiscal and monetary policy makers. The duration of this monetary policy support will come into focus this week with the Federal Reserve’s monetary policy decision and press conference on Wednesday. With the economy recovering from pandemic-era lows and prices jumping as demand recovers, market participants have been closely watching comments from Federal Reserve officials to determine when the central bank might begin to roll back its crisis-era policies.
The Fed indicated that the first course of action would include facilitating the asset purchase program, which is currently underway at a rate of $120 billion per month. The Fed said it is looking for “more significant progress” toward its goals of maximum employment and price stability before this downturn begins, leaving investors to consider the degree of economic improvement that might meet this basic condition. Although the US economy has made strides in recovery, the labor market is still 7 million jobs below pre-pandemic levels. Core producer and consumer prices have risen over the past year, albeit at elevated levels that are unlikely to persist over the coming months.
“The gradient will occur over the next few months; the only questions are when and at what pace,” Ian Shepherdson, chief economist at Pantheon Economics, wrote in a note Monday morning. “A month or two on either side of the year end, or a few billion of faster or slower tapering off, won’t make much of a difference in how the economy performs over the next two years.”
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“The obsession with decreasing is a distraction from the real issue, which is whether rising core inflation pressure means the Fed will have to start raising interest rates sooner than it currently expects, which is what happens in post-2023,” he added.
Meanwhile, as traders await a final tapering start to talk from the Fed, a number of strategists said they expect similar areas of the market that have outperformed so far this year to continue to do so. With the economy continuing to recover from the pandemic and inflation expected to stabilize at a higher level than years ago at least for some time, cyclical and value stocks more supportive of economic reopening could remain areas of strength, some said.
“I don’t think we’ve seen the depletion of that cyclical trade of value. Certainly, we expect we’ll see moderation and growth here in the second half of this year from a very accelerated pace of growth,” Mark Luchini, chief investment strategist at Janie Montgomery Scott, told Yahoo Finance. over the past two quarters.” “However, I still think we will see economic activity that is much above trend, as a result of service industries reopening more consistently… that leads to some inflation emerging that is likely to seep in a higher trend than we have seen. in the past decade or so.”
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7:28AM ET Monday: Stock futures trading stable
Here’s where the markets are trading on Monday morning:
S&P 500 futures contract (ES=F): 4,248.00, +2.25 points (+0.05%)
Dow Jones futures (YM=F): 34442.00, -20 points (-0.06%)
Nasdaq Futures (NQ=F): 14,040.25, +46 points (+0.33%)
Crude Oil (CL=F): +$0.40 (+0.56%) to $71.31 per barrel
Gold (GC=F): – $23.60 (-1.26%) to $1,856.00 per ounce
10-year Treasury (^TNX): +0.2 basis points to gain 1.644%
NEW YORK, NY – APRIL 15: People walk near the New York Stock Exchange on April 15, 2021 in New York City. After major companies reported strong earnings and new economic data pointing to a rebound in consumer spending, US stocks rose to record levels on Thursday. (Photo by Spencer Platt/Getty Images)
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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