Stock futures trample on water before Powell’s testimony, bank profits أرباح

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US stock futures fluctuated on Wednesday ahead of earnings from some of the largest financial institutions and testimony from Federal Reserve Chairman Jerome Powell.

S&P 500 futures rose 0.1%, while Dow Jones Industrial Average contracts were relatively flat, suggesting that both major indexes may be flirting with water at the opening bell. The S&P 500 fell 0.4% on Tuesday. Nasdaq 100 futures rose 0.4% on Wednesday, indicating that technology stocks will outperform for a second day.

Stocks were able to post record highs amid expectations of a strong economic recovery and a plentiful batch of corporate results in the earnings season that has just begun. However, some investors are concerned about the potential obstacles to a broad market rally going forward.

One factor making money managers cautious is the uncertainty about how long the bout of higher inflation – which is running at its fastest pace in 13 years – and how the Fed will respond. Another reason is the spread of the coronavirus in the Delta, which on Wednesday prompted Australian officials to extend Sydney’s lockdown, while South Korea tightened restrictions.

“We wouldn’t be surprised if there was some pullback,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management.

In the longer term, however, Mr. Morris is optimistic about the market outlook. “You still have tremendous growth and at the end of the day it’s dividends and dividends and dividends that drive stock prices.”

BlackRock shares were down 1.3% before the market opened. The fund management giant said it added $81 billion in new investor money in the second quarter, less than it did a year ago. Bank of America shares lost 1.9% in pre-market trading after the bank reported lower-than-analysts’ expectations.

Citigroup and Wells Fargo are also scheduled to post earnings. Rival lenders JPMorgan Chase and Goldman Sachs Group kicked off the reporting season with stunning results on Tuesday.

In the bond markets, the 10-year Treasury yield fell to 1.397% from 1.415% on Tuesday. Bond yields and prices move in opposite directions.

Data showed that US consumer prices jumped 5.4% in June from a year earlier, heightening focus on Mr. Powell’s appearance before the House Financial Services Committee. Mr. Powell is due to present a twice-yearly central bank report on monetary policy starting at noon EST, followed by testimony before the Senate on Thursday.

Wall Street indexes fell on Tuesday after a higher-than-expected consumer price report. Photo: Brendan McDermid/Reuters

Investors will be on the alert for any guidance on when and how the Fed plans to end its bond-buying program. They are also looking for clarification on the central bank’s willingness to allow above-target inflation.

What investors want to know more about is: What do you mean by average inflation targeting? said Remy Olu Petain, fund manager at Schroders. This is the new system the Fed adopted about a year ago, under which the central bank will allow inflation to exceed its 2% target to make up for periods when it has lagged behind.

In overseas markets, the Stoxx Europe 600 Index fell 0.3%, led by shares of travel, leisure and real estate companies.

Japan’s Nikkei 225 lost 0.4% at the close and China’s Shanghai Composite was down 1.1%. Ms Olu Bitan said the regulatory crackdown on consumer technology companies is making investors nervous about the Chinese market even as the People’s Bank of China appears to be stimulating the economy.

The New Zealand dollar rose 1% to $0.70 after the Reserve Bank of New Zealand said it would halt purchases of government bonds this month as the economy recovers from the coronavirus shock.

Write to Joe Wallace at [email protected]

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