Stock futures opened slightly higher Wednesday evening after a mixed day in the markets, with the major equity indexes pulling back from record levels. Traders looked ahead to more earnings and economic reports on Thursday.
Contracts on the S&P 500 ticked up. The blue-chip index dropped on Wednesday after posting two consecutive days of record closing highs. The Dow also declined, while the Nasdaq ended slightly higher.
Investors on Thursday are set to receive more earnings data, as well as some key economic prints including the first estimate of third-quarter U.S. gross domestic product (GDP) and weekly unemployment claims. The GDP report is expected to show the economy decelerated to expand at the slowest rate in over one year for the July through September quarter, with the Delta variant and supply-side constraints capping economic activity.
But even given the expected weakness, and some of the other tepid economic data seen as of late, equity investors have remained resilient and pushed stocks to record levels.
“The market is right to look through some of the third-quarter weakness. A lot of what we’ve seen lately in terms of softness in the data is not really a destruction or disappearance of demand, it’s simply a matter of supply chains that are forcing demand into the future,” Simona Mocuta, State Street Global Advisors chief economist, told Yahoo Finance Live. “There is still a lot of strength ahead of us. There is a lot of money waiting on the sidelines in consumer savings and checking accounts that I think bodes well for 2022.”
A major factor fueling stocks higher has been the bevy of strong corporate earnings results reported to date. Some of the biggest equity index components and largest companies in the U.S. posted much better-than-expected sales and revenue growth compared to last year, reflecting strong demand trends across various pockets of the economy despite shortages. Shares of mega-cap technology companies Alphabet (GOOGL) and Microsoft (MSFT) each set record highs on Wednesday after these companies posted their earnings results Tuesday.
With a positive earnings picture now in view, a lingering question for investors remains how quickly the Federal Reserve will move on monetary policy. While the Federal Reserve has telegraphed that it will most likely begin its asset-purchase tapering process before the end of the year, the timing for when the central bank will begin to raise interest rates from current near-zero levels is still up in the air. Investors are set to receive more commentary on this front after the Federal Reserve’s next policy-setting meeting next week.
Many have suggested these rate hikes will come sooner and more quickly than members of the Federal Reserve have currently signaled, given persistent inflationary pressures seen in the economic data and reinforced in company earnings calls over the past several weeks. This move, however, would raise the cost of borrowing for companies and pressure valuations especially for high-growth stocks.
“The big debate now is how quickly the Fed moves towards actually raising rates,” Kathy Jones, managing director at Charles Schwab, told Yahoo Finance Live. “The expectation in the market has really shifted to expecting as many as two rate hikes in 2022 and three in 2023 and beyond. That’s a pretty aggressive pace of tightening versus where we were just a couple of months ago.”
6:05 p.m. ET: Stock futures open slightly higher
Here’s where markets were trading as the overnight session kicked off Wednesday evening:
S&P 500 futures (ES=F): +5.5 points (+0.12%), to 4,550.00
Dow futures (YM=F): +46 points (+0.13%), to 35,435.00
Nasdaq futures (NQ=F): +14 points (+0.09%) to 15,601.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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