Stock futures searched for direction Wednesday morning as investors looked ahead to more corporate earnings results and another batch of inflation data.
Contracts on the S&P 500 were little changed. During Tuesday’s regular session, the blue-chip index rose to a record intraday high before pulling back and ending lower. Each of the Dow and Nasdaq also pulled back, with cyclical areas of the market like airline stocks and financials posting some of the biggest declines. Wednesday morning, Bank of America (BAC) shares dipped after the company became the latest major bank to post mixed second-quarter earnings results, with revenue net of interest expenses dipping 4% over last year and missing estimates amid a decline in interest rates.
Concerns over the pace of the economic recovery were back in focus this week with the release of hotter-than-expected print on consumer price inflation, which registered the fastest annual increase since 2008 and suggested stubbornly high prices could derail the recovery. The 10-year Treasury yield moved higher following the report to break back above 1.4%. Investors are also nervously eyeing the global spread of the Delta variant of the coronavirus.
Analysts have been split over just how transitory inflationary pressures in the market will ultimately end up being, and for how long the Federal Reserve will be able to shrug off rising prices before making a monetary policy move. Bank of America’s Alexander Lin wrote in note to clients that the firm doesn’t believe the consumer price index (CPI) “report changes much for the Fed,” while ING economist James Knightley said the blowout inflation reading “makes it increasingly difficult for the Fed to stick to its position that elevated inflation readings are merely ‘transitory.'”
Others are still firmly in the mindset that price pressures will subside later this year. And to be sure, much of the rise in the June CPI report comprised an increase in used car and truck prices and other categories consistent with an only momentary reopening-fueled surge.
“This inflation is transitory, and it will begin to pull back as we move towards the end of the year,” Brent Schutte, Northwestern Mutual Wealth Management chief investment strategist, told Yahoo Finance. “There are parts of the economy that were impacted by COVID; those supply chains are still impacted. And that’s what driving up the prices of certain aspects of the inflation equation.”
Investors are set to get an update on inflationary pressure further up the supply chain in the Bureau of Labor Statistics’ producer price index (PPI) on Wednesday. Consensus economists are looking for the broadest measure of producer prices to have climbed by 6.7% in June over last year, marking the fastest. pace on record in data spanning back to 2010.
7:13 a.m. ET: Mortgage applications jumped by the most since January last week as rates fell
Mortgage application volume increased by the most since January last week as an at least momentary dip in interest rates attracted buying and refinancing activity in the housing market.
The Mortgage Bankers Association’s weekly mortgage index rose 16% week-on-week during the period ended July 9. Refinances rose by 20% over last week, but were still 29% lower compared to the comparable week in 2020. Purchases were up 8% on the week, including a seasonal adjustment for the Fourth of July holiday. On an unadjusted basis, purchases were down 13% week-on-week and were down 29% over last year.
“Overall applications climbed last week, driven heavily by increased refinancing as rates dipped again. Treasury yields have trended lower over the past month as investors remained concerned about the COVID-19 variant and slowing economic growth,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a press statement. “Mortgage rates fell for the second consecutive week as a result, with the 30-year fixed rate hitting 3.09%, its lowest level since February 2021.
7:07 a.m. ET Wednesday: Stocks trade mixed ahead of more earnings, inflation data
Here’s where markets were trading Wednesday morning:
S&P 500 futures (ES=F): 4,364.00, +2.75 points (+0.06%)
Dow futures (YM=F): 34,770.00, -6 points (-0.02%)
Nasdaq futures (NQ=F): 14,913.75, +0.33 points (+0.33%)
Crude (CL=F): -$0.65 (-0.65%) to $74.76 a barrel
Gold (GC=F): +$6.40 (+0.35%) to $1,816.30 per ounce
10-year Treasury (^TNX): -1.7 bps to yield 1.398%
6:05 p.m. ET Tuesday: Stock futures hug the flat line
Here’s where markets were trading Tuesday evening
S&P 500 futures (ES=F): 4,359.75, -1.5 points (-0.03%)
Dow futures (YM=F): 34,778.00, +2 points (+0.01%)
Nasdaq futures (NQ=F): 14,864.75, -0.25 points (roughly unchanged)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck