Wednesday July 7th

7-07-2021

U.S. stock futures are flat as rally to records pauses, tech stocks set to gain

U.S. stock index futures were flat on Wednesday morning after the S&P 500 ended a seven-day winning streak. Technology stocks were set to lead again as the Nasdaq aims for another record open. Dow Jones Industrial Average futures fell just 10 points. S&P 500 futures rose 0.1% and Nasdaq 100 futures popped 0.55%. With falling rates and concern about peaking economic growth, investors have rediscovered their old Big Tech favorites. Apple and Amazon are both up double digit percentage returns over the past 1 month, far outpacing the S&P 500′s 2.8% return. Major technology names like Apple and Google-parent Alphabet rose in premarket trading on Wednesday. Shares of Amazon rose before the bell after the e-commerce giant gained nearly 5% in the previous session. Energy stocks were set to gain as oil prices increased. WTI crude touched a 6-year high briefly on Tuesday before retreating. Crude was back up about 2% on Wednesday. Devon Energy, Occidental Petroleum and APA Corp were higher in premarket trading. Bank shares including Goldman Sachs and JPMorgan Chase continued their retreat on Wednesday as long-term bond yields fell further, hurting the industry’s profitability prospects. Defying many predictions, the 10-year Treasury yield fell to 1.306% on Wednesday. Yields on the short-end of the so-called Treasury curve, including 1-year bills and 2-year notes, were flat to higher. During the regular session on Tuesday, the 30-stock Dow fell 208 points. The S&P 500 ended the day down by 0.2%, retreating from a record. The Nasdaq Composite rose nearly 0.2% to a fresh all-time high. Investors may be worried the economy might be approaching its peak and that a correction could be on the way. In addition to complacency in the market, the combination of profit-margin pressures, inflation fears, Fed tapering and possible higher taxes could contribute to an eventual drawdown, market strategists say. Investors will be listening more clues on the direction of the Federal Reserve’s monetary policy when it releases its latest meeting minutes Wednesday afternoon, which could be a catalyst for a move in both bonds and stocks. The Fed’s minutes are expected to be dovish with the central bank looking for progress in the labor market and not worried that recent inflation will become a persistent trend. Slowing down the bond buying would be the Fed’s first major retreat from the easy policies it put in place when the economy shut down last year. The end of the Fed’s $120 billion a month in Treasury and mortgage purchases would also signal that the central bank’s next move could be to raise interest rates. Shares in Asia-Pacific were mixed on Wednesday following losses on Wall Street with the S&P 500 ending its seven-day winning streak. Chinese electric carmaker Xpeng made its debut in Hong Kong on Wednesday. Shares ended the trading day unchanged after rising nearly 2% in the early moments of trading. The broader Hang Seng index in the city slipped 0.4% to close at 27,960.62. Mainland Chinese stocks closed higher, with the Shanghai composite rising 0.66% to 3,553.72 while the Shenzhen component advanced 1.857% to 14,940.05. In Japan, the Nikkei 225 dropped 0.96% to close at 28,366.95 while the Topix index declined 0.86% to end the trading day at 1,937.68. South Korea’s Kospi shed 0.6% on the day to 3,285.34. Oil rose to $75 a barrel on Wednesday with support coming from a tight market, after a steep drop from multi-year highs in the previous session amid uncertainty about OPEC+ supply policy. Underlining current tightening conditions, U.S. crude inventories are expected to fall for a seventh straight week. A failure of OPEC+ talks on Monday also means a planned output rise for August has yet to be agreed. “With no agreement, the production and export levels apparently remain unchanged according to the overall framework, which creates the impression that the group does not shy away from overtightening the market,” said Norbert Ruecker of Swiss bank Julius Baer. “There is indeed some uncertainty with regard to the consequences of the latest meeting’s surprising outcome,” he said. Brent crude was up $1.20, or 1.6%, at $75.73 per barrel, after slumping more than 3% on Tuesday. U.S. West Texas Intermediate gained $1.23, or 1.7%, to trade at $74.60 per barrel, having declined by more than 2% in the previous session. Gold prices edged higher on Wednesday and were on course for a sixth straight session of gains, driven by a dip in U.S. Treasury yields ahead of minutes from the Federal Reserve’s June meeting that could provide more clues on the policy stance. Spot gold rose 0.4% to $1,804.07 per ounce by 0851 GMT, after hitting its highest since June 17 at $1,814.78 on Tuesday. U.S. gold futures gained 0.6% to $1,805.20 per ounce.