U.S. stock index futures were little changed ahead of a big reading on inflation that could determine how fast the Federal Reserve moves to take away monetary stimulus.
Futures contracts tied to the Dow Jones Industrial Average gained 23 points. S&P 500 futures were slightly lower and Nasdaq 100 futures were off by 0.3%.
July’s Consumer Price Index reading will be released on Wednesday. Economists surveyed by Dow Jones expect the index to have risen 0.5% last month, or 5.3% year over year. In June prices jumped 0.9%, or 5.4% on an annual basis, which was the biggest monthly increase since August 2008. Excluding energy and food, economists expect CPI rose by 0.4% last month, compared with the 0.9% increase in core in June. June’s core year-over-year increase of 4.5% was the highest since September 1991.
If the report comes in even hotter than expected, stocks could take a hit on fears it may cause the Fed to taper its monthly $120 billion bond purchases on a faster schedule than the market is prepared for, setting the table for an eventual rate increase.
The 10-year Treasury yield was slightly higher into the report at about 1.37%.
On Tuesday, the Dow gained 162.82 points, or 0.46%, while the S&P 500 advanced 0.1%. Both hit all-time intraday highs while also closing at records. The Nasdaq Composite slid 0.49%, registering its second negative session in the last three. The dip came as treasury yields advanced, weighing on growth-oriented areas of the market.
The Senate passed the infrastructure bill Tuesday, which earmarks $550 billion in new spending for areas including transportation and the electric grid. The bill now heads to the House, although Speaker Nancy Pelosi, D-Calif., has said she will not bring it to the floor until the Senate also passes a budgetary proposal.
Cyclical areas of the market got a boost during trading, helped by both the bill’s passage and the rise in rates. The energy, materials, industrials and financials sectors all advanced more than 1%.
The march to record highs for stocks comes despite Covid case numbers rising in the U.S. and around the world.
“Widespread vaccine distribution and distancing measures have helped limit the variant’s impact, but we could still see some drag on economic growth as some restrictions are reintroduced and consumers potentially become more cautious,” said Barry Gilbert, asset allocation strategist at LPL Financial. “While we may see an increase in market volatility due to the Delta variant, we believe the S&P 500 is still likely to see more gains through the end of the year,” he added.
Through Friday, 87% of the S&P 500 companies that reported quarterly results have beat earnings estimates. The same percentage of companies beat revenue estimates during that timeframe.
“There’s been a lot to take in these last few weeks; major earnings, a hawkish Fed and some knockout economic readings,” said Craig Erlam, senior market analyst at Oanda. “Everything it seems is now pointing towards the Fed tapering its asset purchases in the coming months, with delta the only things potentially standing in its way as it spreads across the US (and many other countries).”
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