Stock Futures Drift Higher Ahead of Powell Testimony

U.S. stock futures ticked up Wednesday ahead of testimony from Federal Reserve Chairman

Jerome Powell.

Futures for the S&P 500 edged up 0.2%, while contracts for the Dow Jones Industrial Average were relatively flat, suggesting that both major indexes may tread water at the opening bell. The S&P 500 fell 0.4% on Tuesday. Nasdaq-100 futures rose 0.5% Wednesday, signaling that technology stocks will outperform for a second day.

Stocks have powered to record highs on expectations of a strong economic rebound and a bumper set of corporate results in the earnings season just getting under way. However, some investors are wary of potential hurdles for the broad market rally up ahead.

One factor making money managers cautious is uncertainty about how long the bout of higher inflation—running at its quickest pace in 13 years—will last and how the Fed will respond. Another is the spread of the delta variant of coronavirus, which on Wednesday prompted Australian officials to extend a lockdown of Sydney, while South Korea tightened curbs.

“We would not be surprised if you had a bit of a pullback,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management.

Longer term, however, Mr. Morris is bullish about the outlook for the market. “You’ve still got phenomenal growth and at the end of the day, it is earnings, earnings, earnings that drive equity prices.”


shares fell 2.1% before the market opened. The fund-management giant said it added $81 billion in new investor money in the second quarter, less than it did a year ago.

Bank of America

shares lost 1.9% in premarket trading after the bank posted revenue that fell short of analysts’ expectations.

Rival lenders

JPMorgan Chase


Goldman Sachs Group

kicked off the reporting season with blockbuster results on Tuesday.

Shares of

Delta Air Lines

gained 2.1% premarket after the airline reported its first quarterly profit since the start of the coronavirus pandemic. Apple rose 2% after Bloomberg News reported that the company had asked suppliers to make 20% more new iPhones than in recent years.

Oil prices slid after the Organization of the Petroleum Exporting Countries reached a compromise with the United Arab Emirates over production, resolving a standoff that whipsawed energy markets this month. Brent-crude futures, the international benchmark, ticked down 0.2% to $76.36 a barrel in a choppy session.

In bond markets, the yield on 10-year Treasury notes edged down to 1.385%, from 1.415% on Tuesday. Bond yields and prices move in opposite directions.

Data showing that U.S. consumer prices jumped 5.4% in June from a year earlier have sharpened focus on Mr. Powell’s appearance before the House Financial Services Committee. Mr. Powell is due to present the central bank’s twice-yearly report on monetary policy starting at noon ET, followed by testimony to the Senate on Thursday.

Wall Street indexes fell on Tuesday after a higher-than-expected consumer price report.


brendan mcdermid/Reuters

Investors will be alert for any guidance about when and how the Fed plans to wind down its bond-buying program. They are also looking for clarity about the central bank’s willingness to let inflation run above target.

“What investors want to know more of is: What do you mean by average inflation targeting?” said Remi Olu-Pitan, a fund manager at Schroders. That is the new system adopted by the Fed almost a year ago, under which the central bank will allow inflation to overshoot its 2% goal to make up for periods when it lagged behind.

In overseas markets, the Stoxx Europe 600 slipped 0.2%, led lower by shares of travel, leisure and real-estate companies.

Japan’s Nikkei 225 lost 0.4% by the close of trading and China’s Shanghai Composite Index dropped 1.1%. A regulatory crackdown on consumer-technology companies is making investors nervous about the Chinese market even as the People’s Bank of China appears to be stimulating the economy, Ms. Olu-Pitan said.

New Zealand’s dollar rose 1% to $0.70 after the Reserve Bank of New Zealand said it would halt purchase of government bonds this month as the economy rebounds from the shock of coronavirus.

Write to Joe Wallace at [email protected]

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Stocks Drop Amid Powell’s Testimony

U.S. stocks edged down Tuesday as investors digested testimony by Federal Reserve Chairman Jerome Powell about the U.S. economy.

The S&P 500 ticked down 0.8% as of the 4 p.m. close of trading in New York. The Nasdaq Composite fell 1.1%, while the Dow Jones Industrial Average fell 0.9%.

Mr. Powell, in a joint appearance with Treasury Secretary Janet Yellen, reiterated in a congressional hearing that the central bank will continue providing support to the economy through loose monetary policy. Mr. Powell also said he doesn’t expect the $1.9 trillion stimulus package will lead to an increase in inflation, but he emphasized that the central bank has tools to deal with rising price pressures if necessary.

Investors are also reassessing their expectations for a fast and widespread global recovery, which had led to rising bets earlier this year that companies sensitive to an economic recovery would benefit. Rising Covid-19 cases in Europe and recent extensions to lockdowns in Germany, France and Italy are also weighing on sentiment.

“It feels like the reflation theme is running into a few roadblocks,” said Sebastian Mackay, a multiasset fund manager at Invesco. “We are probably in a cyclical recovery, but we may have gotten ahead of ourselves. This is a pause for thought: how rapid is this recovery actually going to be?”

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Stocks Turn Higher After Fed Holds Steady

U.S. stocks rose Wednesday after the Federal Reserve vowed to keep its easy-money policies in place until the U.S. economy further recovers from the effects of the Covid-19 pandemic.

The S&P 500 added 0.3%, and the Dow Jones Industrial Average climbed 0.6%. The tech-heavy Nasdaq Composite advanced 0.4%, reversing losses earlier in the session.

All three indexes turned higher at the release of the central bank’s 2 p.m. ET statement. Investors are focused on any sign the monetary stimulus that has supported markets during the pandemic could begin to subside.

With unemployment still elevated, Fed officials are taking a cautious approach that supports the economy, said

George Catrambone,

head of Americas trading at asset manager DWS Group,

“Investors are taking some solace in that,” he said. “We’re going to make sure it’s there, that the recovery is sustainable and inflation is sustainable, before we really think about raising rates.”

The Fed also highlighted the brightening outlook for growth. Investors in recent weeks have trimmed bets on the technology stocks that soared earlier in the pandemic while adding shares of economically sensitive companies that should do well as the vaccine rollout progresses and more fiscal stimulus enters the financial system.

Shares of



are down 5.6% and 3.1% this year, respectively, while the energy and financial sectors are leading the S&P 500.

“Tech is the funding source for reallocation,” said

Jamie Cox,

managing partner for Harris Financial Group. “You’re restoring the allocations that you had pre-pandemic.”

Money managers have started pricing in a rise in inflation, leading to a selloff in government bonds, and are betting that interest rates will start climbing by the end of next year. They have started exiting stocks that look to be too richly valued after last year’s rally.

“Markets across the board are expensive today, and that is pinned on central-bank support,” said

Hugh Gimber,

a strategist at J.P. Morgan Asset Management. “So this whole market is very, very sensitive to changes in central-bank policy.”

After the Fed’s reassurance that interest rates will stay low, shares of rapidly growing companies rebounded from earlier losses. The Russell 1000 Growth Index was recently up 0.3%, trailing a 0.4% gain by the Russell 1000 Value Index. Value stocks—which trade at low multiples of their book value, or net worth—have outperformed growth stocks in recent weeks.

“The resurgence of value investing has been the big story of the year,” said

Mace McCain,

chief investment officer at Frost Investment Advisors, noting that the rollout of coronavirus vaccines should help the economic recovery. “We expect tremendous growth this next year.”

In bond markets, the yield on the benchmark 10-year U.S. Treasury note rose to 1.641%, from 1.622% Tuesday. Yields rise as the price falls. The yield has climbed sharply from this year’s low of 0.915% on Jan. 4.

Traders worked on the floor of the New York Stock Exchange on Tuesday.


Colin Ziemer/Associated Press

Among individual stocks,

NRG Energy

fell 17%. The company said it is withdrawing its 2021 financial guidance after the recent winter storm hit its results. Shares of

Plug Power

dropped 8% after the hydrogen and fuel-cell technology company said it would restate financial statements.

Brent crude, the international benchmark for oil, fell 0.6% to $68.00 a barrel.

In overseas markets, the Stoxx Europe 600 edged 0.4% lower. Most major indexes in Asia were little changed. South Korea’s Kospi index fell 0.6%, while the Shanghai Composite, Hang Seng and Nikkei 225 indexes all ended the day nearly flat.

Write to Karen Langley at [email protected] and Will Horner at [email protected]

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