Stock futures mixed after S&P 500, Dow set records

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Stock futures opened little changed Wednesday evening after another record-setting session, as investors took into account a report pointing to contained inflationary pressures and considered the likelihood of more government spending on infrastructure.

Contracts on the S&P 500 hugged the flat line. Both the blue-chip index and the Dow rose to record intraday and closing levels for a second straight session on Wednesday. 

One of the latest sources of fuel for equities came after the Labor Department’s monthly consumer price index showed that prices rose in-line with expectations in July, gaining 0.5% month-on-month to decelerate from June’s gain. Prices for used cars and trucks and airline tickets slowed markedly, underscoring the moderation in inflationary pressures as the economic recovery matured and an initial wave of pent-up consumer demand was released. 

“We’re still at very high levels of inflation in this country and the debate still rages as to whether we’re going to see a glide path towards substantially lower levels of inflation, or will it remain at sticky levels much higher than what was anticipated by the Fed and market participants,” Mark Luschini, chief investment strategist at Janney Montgomery Scott, told Yahoo Finance. “However in the meantime, it also does suggest that perhaps we have seen the peak in this inflation cycle … perhaps it’s indicative that what the Fed has suggested to investors, that this inflationary spike will be transitory, will turn out to come to fruition.”

Meanwhile, the passage in the U.S. Senate of a $1 trillion infrastructure bill earlier has further boosted cyclical stocks like industrials and materials, given these companies stand to gain directly from the increased government spending on physical structures. The chamber also voted to approve the framework for a $3.5 trillion budget resolution that would address a more expansive set of healthcare, childcare, education and climate change initiatives central to the Biden administration’s goals.

With U.S. equity markets at record highs, many investors have been awaiting the next catalysts for risk assets, especially given the recent strength in economic data and second-quarter earnings results among major corporations. Many pundits have suggested a slowdown in both economic and earnings growth across a number of major data points is likely going forward, given that the peaks appear to have been put in for these areas. 

“I would probably summarize [the backdrop now] in one word, which is ‘deceleration,'” Omar Aguilar, chief investment officer of passive equity and multi-asset strategies at Charles Schwab Investment Management, told Yahoo Finance. “If you think of all the data that we have received over the last few weeks, it all points to deceleration of all sorts. The economy is decelerating, earnings growth is decelerating. The rate of inflation that we just saw this morning is also decelerating. The peak in most of these indicators suggests that going forward, we’re going to continue to see deceleration of the majority of these things.” 

“That’s obviously a mixed signal for the market,” he added. “The market seems to have taken it the right way, mostly thinking that this confirms the Fed officials’ view that inflation will be transitory, and therefore, the possibility for those rates to stay lower and for the tapering program to start later this year or early next year … [but] we should expect more volatility, because more mixed signals will continue to happen.”

6:13 p.m. ET Wednesday: Stock futures edge higher 

Here’s where markets were trading Wednesday evening: 

  • S&P 500 futures (ES=F): -0.25 points (-0.01%) at 4,440.25

  • Dow futures (YM=F): +9 points (+0.03%) to 35,381.00

  • Nasdaq futures (NQ=F): -15.5 points (-0.1%) to 15,004.00

NEW YORK, NEW YORK – AUGUST 10: People walk by the Fearless Girl statue outside of the New York Stock Exchange (NYSE) on August 10, 2021 in New York City. Markets were up in morning trading as investors look to a rare bipartisan effort in the Senate to pass a massive infrastructure bill that, if passed, will infuse billions into the American economy. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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