Wall Street is gearing up for another big economic event
Stock futures opened Tuesday evening on Wednesday after another choppy session in the markets, with another batch of bank earnings and labor market and inflation data due to release on Thursday.
Contracts on the S&P 500 pound beat flat lines. Both the Nasdaq and Blue-chip index closed out the session higher, led by a jump in technology stocks, as Treasury yields pulled back following a recent run up. The recent drop in yields — with the benchmark 10 year yield declining to 1.55% after topping 1.62% just earlier this week — also catalyzed a slide in the financial industry, which was the biggest laggard in the S&P 500 on Wednesday.
Bank earnings are set to begin on Thursday with companies like Bank of America BAC Morgan Stanley MS and Citigroup C reporting quarterly results before the opening bell.
The results will follow a strong report from JPMorgan Chase on Tuesday. America's largest bank by assets handily posted third-quarter results that fast topped estimates. Investment banking revenues picked up more than anticipated and a strengthening economic backdrop enabled the firm to release more than $2 billion of credit reserves prior to safeguarding against potential customer defaults.
As earnings season rolls out in the coming weeks, investor focus will be fixed on companies' commentary around prices increases, supply chain disruptions and labor challenges. All of these factors have been seen as contributing to a price slowdown compared to the second quarter. However, how long these challenges prove to be, and which companies will inevitably be hit by these factors, has been a central question for investors.
At the macro level, inflation has already lasted for months across various pockets of the economy. The Bureau of Labor Statistics' September Consumer Price Index CPI rose 5.4% in September compared to last year, the indiceing had reached its fastest pace since 2008. A jump in rent, groceries and energy saw particularly notable gains. On Thursday the BLS is set to release its Producer Price Index PPI which is expected to show that selling prices for producers increased by 8.7% in September over last year, or the fastest rate on record in data spanning back to 2010.
Policymakers at the Federal Reserve have largely declared that inflation during the recovery will prove transitory and will wane as soon as supply bottlenecks ease. The string of above-target inflation readings this year has however called into question officials' views on short-lived price pressures and contributed to concerns that the central bank may need to act faster and aggressively than so far telegraphed to bring inflation pressures in line.
What we see is an economy that continues to run hot, Jeff Klingelhofer, Thornburg Investment Management's co-head of investments, told Yahoo Finance Live. Consumers today have high savings, and they ll be drawing that down in the months to come. And so, we are absolutely seeing higher wages trickling into the economy The key to watch will be, as the economy continues to heal, as vaccinations continue to increase and businesses open whether that trend continues or not. We ll be watching those wage numbers exceptionally carefully - they really are the key to trying to figure out where the Fed goes and whether this inflation is transitory in nature, he added. At this point though, we think it will moderate in the months and quarters to come.