US stock index futures showed little change in early morning trading on Wednesday after the large averages ended regular trading in the red on Tuesday, weighed down by inflation fears.
Earnings reports for the second quarter continue on Wednesday, with Bank of America, Citigroup and Delta Air Lines reporting before the bell.
Futures contracts linked to the Dow Jones Industrial Average lost 25 points. S&P 500 futures were flat. Nasdaq 100 futures were up 0.3%.
The Dow fell 107 points, or 0.3%, on Tuesday and fell from a record high near 35,000 on Monday. The S&P and Nasdaq Composite hit intraday all-time highs on Tuesday, then gave up those gains, and ended up closing lower. The S&P 500 was down 0.35% while the Nasdaq Composite was down 0.38%, each posting their first negative session of three.
The decline came after the Labor Department said inflation rose at the fastest rate it had in nearly 13 years over the past month. According to the economists surveyed by Dow Jones, the consumer price index rose 5.4% year-on-year and was thus above expectations of a rise of 5%. However, since a significant portion of the overall increase was due to a surge in used car prices, some were quick to say that inflation is likely to be temporary.
The data on producer prices are expected on Wednesday, with economists expecting an increase of 0.6% from the previous month, according to the Dow Jones.
In the middle of a bearish day on Wall Street, the S&P 500 tech sector bucked the negative trend and closed at a new all-time high. The 10 other S&P sectors fell, with real estate leading the losses.
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The hot inflation report overshadowed the strong earnings reports for the second quarter. JPMorgan and Goldman Sachs opened earnings season Tuesday, with both banks beating sales and earnings estimates. PepsiCo also beat estimates.
Blackrock, the world’s largest wealth manager, reported profits and revenues that exceeded expectations on Wednesday morning. The stocks were hardly changed after the results.
Wells Fargo and PNC Financial will also announce the results before the bell on Wednesday.
A total of 23 S&P 500 companies will be releasing quarterly results this week and the second quarter results are set to show a sizeable comeback from the depths of the pandemic. FactSet analysts estimate earnings growth will be 64% qoq.
The big averages are still hovering around their all-time highs, and Wall Street strategists are optimistic about what the second half of 2021 will bring as the economy continues to recover from Covid-19.
“After a 2020 that we will never forget, we are optimistic about the second half of 2021 and even 2022,” said Burt White, LPL Managing Director and Chief Investment Officer. “We believe we are at the beginning of the economic cycle and that the next recession may be years away.”
UBS on Tuesday raised its S&P 500 target for December 2021 to 4,500, up from an earlier forecast of 4,400. The call depends on strong numbers from the second quarter results.
“We believe the stock bull market will remain on a solid footing, fueled by huge consumer cash holdings, rising corporate investment and a still accommodating Fed,” the company said in a statement to customers.
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