Stock futures opened little changed Wednesday evening as investors digested a host of mixed corporate earnings results and reassurances from top central bank officials that the latest spike in inflation would likely prove temporary.
Contracts on the S&P 500 hugged the flat line after the index eked out a record intraday high during Wednesday’s regular session. Dow and Nasdaq futures also traded little changed.
The big banks that have so far reported second-quarter earnings have posted mixed results, with revenue and net interest income coming under pressure as interest rates dipped from a March year-to-date peak.
Remarks on Wednesday from Federal Reserve Chair Jerome Powell before Congress also called into question the strength of the economic rebound, with the Fed leader saying the U.S. economy was still a ways off from meeting the central bank’s threshold of “substantial further progress” in recovering. The cyclical energy and financial sectors, which stand to benefit from a pick-up in economic activity, underperformed during Wednesday’s session.
“As of late, bank stocks and the financial sector writ large has been flagging a bit after what’s been a pretty strong early part of the year for that sector. And I think there’s a couple of things going on,” Jason Ware, Albion Financial Group partner and chief investment officer, told Yahoo Finance on Wednesday. “First of all, the elements that were driving bank stocks higher and other groups as well in that cyclical and value trade has begun to wane a bit as the market is beginning to digest what is now becoming known as peak growth.”
“Second, we have interest rates that have dipped as of late,” he added. “And of course, banks are tied very closely to what’s happening with yields.”
The drop in Treasury yields, with the benchmark 10-year yield down nearly 7 basis points to dip back below 1.4%, also coincided with Powell’s remarks doubling down on his belief that recent inflationary pressures will eventually subside. In congressional testimony, the Fed leader pointed to the reopening-related categories of goods and services that have seen the biggest increases in inflation, like used car and truck prices, as evidence that the jump in prices may pass later this year.
Video: ‘Investors are on pause’ with financial stocks: Analyst (Yahoo! Finance)
But transitory or not, the inflation data for the past month has come in much hotter-than-expected. Tuesday’s consumer price index registered the fastest annual increase since 2008 for June/ And on Wednesday, the Bureau of Labor Statistics’ June producer price index posted a 7.3% year-over-year increase, marking the fastest rise on record in data spanning back to 2010.
“Multi-year highs in inflation and how the Fed may respond is what markets are focused on, especially as they relate to 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 coming meetings.”
“In sum, there was no change in the message from Mr. Powell, even as inflation continues to surprise to the upside and job growth picks up,” Farooqi added.
6:01 p.m. ET Wednesday: Stock futures hug the flat line
Here’s where markets were trading 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