Wednesday July 14th

14-07-2021

U.S. stock futures rise as Powell says the Fed is still a ways off from letting up on easy policy

U.S. stock index futures rose further into the green after Federal Reserve Chairman Jerome Powell said in prepared remarks the central bank was still a ways off from altering its easy policies. Investors also assessed a rush of second-quarter earnings results from big banks and other major companies. Futures contracts tied to the Dow Jones Industrial Average added around 82 points, or 0.2%. S&P 500 futures were higher by about 0.4%. Nasdaq 100 futures were higher by roughly 0.7%, lifted by a gain in technology stocks. Apple shares were up more than 1% in premarket trading. Powell will say in his required semiannual testimony before Congress Wednesday that the central bank can wait before it starts to ease its bond purchases despite surging inflation readings, according to remarks released before his testimony. The central bank chief will note he still expects inflation to moderate. Powell is set to speak before the House Committee on Financial Services at noon ET. He’ll testify before the Senate on Thursday. The yield on the 10-year Treasury fell after Powell’s remarks, continuing its decline in recent months. Yields fell even as a reading on producer prices from June showed higher than expected inflation. This follows the biggest jump in CPI since 2008, released on Tuesday. Second-quarter earnings reporting season continued Wednesday with several companies posting earnings before the bell. Bank of America shares fell about 2% in premarket trading after it reported second-quarter revenue of $21.6 billion, just under the $21.8 billion estimate from Refinitiv. Low interest rates knocked net interest income by 6%, the bank said. Blackrock, the largest asset manager in the world, reported earnings and revenue that topped expectations on Wednesday morning. Shares were down more than 2% in early morning trading. Shares of Citigroup and Wells Fargo each ticked slightly higher after both companies posted better-than-expected second-quarter earnings results. Delta Air Lines shares gained in the premarket after reporting its first quarterly profit of $652 million since 2019, boosted by federal aid. The airline also said domestic leisure demand has fully recovered and corporate travel increased in the quarter. In total, 23 S&P 500 companies will post quarterly results this week and second-quarter results are supposed to show a sizable comeback from the depths of the pandemic. Profit growth is expected to total 64% year-over-year for the quarter, according to analyst estimates collected by FactSet. American Airlines shares gained roughly 3% in the premarket after the carrier forecast better revenue and a narrower loss than its previous estimate for the second quarter. The company is set to report quarterly fiscal results on July 22. UBS raised its December 2021 S&P 500 target to 4,500 on Tuesday, up from a prior forecast of 4,400. The call hinges on strong numbers from second-quarter earnings. “We believe the equity bull market remains on solid footing driven by huge consumer cash balances, surging business investment, and a still-accommodative Fed,” the firm said in a note to clients. Meanwhile, Apple shares gained in the premarket. Bloomberg reported Wednesday night that Apple is looking to increase new iPhone production for 2021 by 20%. JPMorgan also added the tech giant to its focus list. The firm raised its price target for Apple and believes the stock can gain 20% in the next 12 months. The Dow on Tuesday fell 107 points, or 0.3%, retreating from a record close near 35,000 Monday. The S&P and Nasdaq Composite hit all-time intraday highs on Tuesday before giving back those gains and ultimately closing lower. The S&P 500 dipped 0.35%, while the Nasdaq Composite shed 0.38%, each posting their first negative session in three. The decline came after the Labor Department said inflation last month advanced at its fastest pace in nearly 13 years. The consumer price index jumped 5.4% from a year earlier, which was above expectations of a 5% increase, according to economists surveyed by Dow Jones. However, since a significant portion of the overall increase came from a jump in used car prices, some were quick to say the inflation will likely be transitory. Amid a down day on Wall Street, the S&P 500 tech sector bucked the negative trend and closed at a fresh all-time high. The 10 other S&P sectors dipped, with real estate leading the losses. JPMorgan and Goldman Sachs kicked off earnings season on Tuesday, with both banks beating top and bottom line estimates. PepsiCo also topped estimates. The major averages are still hovering around their all-time highs, and Wall Street strategists are optimistic about what the second half of 2021 holds as the economy continues to recover from Covid-19. “After a 2020 we will never forget, we look ahead to the second half of 2021, and even into 2022, with optimism for the future,” said Burt White, LPL managing director and chief investment officer. “We believe we are early in the economic cycle and the next recession is potentially years away.” Shares in Asia-Pacific mostly slipped on Wednesday following a hotter-than-expected U.S. inflation report released overnight. The Shanghai composite in mainland China fell 1.07% to close at 3,528.50 while the Shenzhen component fell 0.875% to end the trading day at 15,056.32. Hong Kong’s Hang Seng index shed 0.69%, as of its final hour of trading. In Japan, the Nikkei 225 closed 0.38% lower at 28,608.49 while the Topix index fell 0.23% on the day to 1,963.16. The Kospi in South Korea dipped 0.2% to close at 3,264.81. Oil prices dropped on Wednesday after Reuters reported that Saudi Arabia and the United Arab Emirates had reached a compromise over a global supply deal that will allow the UAE to boost its output. The deal between the two Gulf producers means that members of the Petroleum Exporting Countries (OPEC), Russia and other producers, a group known as OPEC+, will be able to extend a deal to curb output until the end of 2022, the sources said. Brent crude was down 8 cents, or 0.1%, at $76.42 per barrel after dropping by over $1 earlier. West Texas Intermediate was off by 18 cents, or 0.24%, at $75.07 per barrel. Gold prices rose on Wednesday after robust U.S. inflation numbers lifted the metal’s appeal as an inflation hedge, although gains were kept in check ahead of Federal Reserve Chair Jerome Powell’s testimony as early tapering bets rise. Spot gold was up 0.4% at $1,814.90 per ounce, as of 1030 GMT. U.S. gold futures gained 0.3% to $1,815.