Stocks end mixed as earnings rise, Powell reaffirms stance on transient inflation

Equity futures were little changed on Wednesday night as investors digested a host of mixed corporate results and reassured senior central bank officials that the latest spike in inflation would likely be temporary.

S&P 500 contracts hit the flat line after the index hit a record intraday high in Wednesday’s regular session. Dow and Nasdaq futures were also little changed.

The big banks that have so far released second quarter results have shown mixed results, with income and net interest income under pressure as interest rates have fallen from a peak reached in March.

Federal Reserve Chairman Jerome Powell’s remarks to Congress on Wednesday also questioned the strength of the economic rebound, with the Fed leader saying the US economy was still far from hitting the bank’s threshold. central “further substantial progress” in the recovery. Cyclical energy and financials sectors, which should benefit from a pickup in economic activity, underperformed in Wednesday’s session.

“In recent times, bank stocks and the financial sector as a whole have gone down a bit after what has been a pretty strong start to the year for the sector. And I think a couple of things are happening,” Jason Ware, Albion Financial Group partner and chief investment officer, Yahoo Finance said Wednesday. “First of all, the elements that were pushing bank stocks higher and other groups also in this cyclical and value trading started to fade a bit as the market begins to digest what is called now peak growth. “

“Second, we have interest rates that have come down lately,” he added. “And of course the banks are very closely tied to what happens with returns.”

The decline in Treasury yields, with the benchmark 10-year yield falling nearly 7 basis points to fall below 1.4%, also coincided with Powell’s remarks doubling down on his belief that recent inflationary pressures would eventually subside. In testimony to Congress, the Fed chief pointed to the reopening-related categories of goods and services that saw the biggest increases in inflation, such as used car and truck prices, as evidence that the price hike could pass later this year.

But transitory or not, last month’s inflation data is much warmer than expected. Tuesday’s consumer price index recorded the fastest annual increase since 2008 for June / And Wednesday, Bureau of Labor Statistics June Producer Price Index posted a 7.3% year-over-year increase, marking the fastest ever increase in data since 2010.

“Multi-year highs in inflation and how the Fed may react is what the markets are focusing on, especially when it comes to asset purchases,” wrote Rubeela Farooqi of High Frequency Economics in a commentary. note. “[Powell] said the timing and composition of the cut will be something officials will discuss in future meetings. “

“In summary, there has been no change in Mr Powell’s message, although inflation continues to surprise on the upside and job growth accelerates,” Farooqi added.

6:01 p.m. ET Wednesday: Stock futures line up on the flatline

Here’s where the markets were trading Tuesday night

  • S&P 500 Futures Contracts (ES = F): 4,366.5, -1.25 point (-0.03%)

  • Dow Futures (YM = F): 34,798.00, -18 points (-0.05%)

  • Nasdaq Futures (NQ = F): 14,895.25, +3.5 points (+ 0.2%)

NEW YORK, NEW YORK – MAY 11: People visit the Fearless Girl statue outside the New York Stock Exchange on Wall Street on May 11, 2021 in New York City. New York Governor Andrew Cuomo announced the lifting of pandemic restrictions on May 19. (Photo by Noam Galai / Getty Images)

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

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