Equity futures traded slightly higher on Tuesday night as investors eagerly awaited a key monetary policy decision from the Federal Reserve.
S&P 500 contracts edged up. Earlier, the three major US stock indexes closed the session lower, with the S&P 500 and Nasdaq retreating from records set earlier this week.
Traders are eagerly awaiting the conclusion of the Federal Reserve’s latest monetary policy meeting, which will conclude with a policy statement Wednesday afternoon and a press conference by Federal Reserve Chairman Jerome Powell. Both come at a critical juncture in the US economic recovery, with economic activity accelerating and producing inflationary pressures that some market participants believe could justify a monetary policy change in the shorter term than the central bank says. currently telegraphed.
On Tuesday, new economic data showed producer prices rose at the fastest annual rate on record, with inflationary pressures trickling down the supply chain as demand picks up. The data added to a slew of other readings to corroborate these rising prices, with the Consumer Staples Index and Basic Personal Consumption Expenditure peaking nearly 30 years in May.
“I think this inflation boost, while transient, is going to be much higher than what the Fed and market players are expecting right now. I expect warmer inflation data, but ultimately, these pressures ease as we approach 2022. ”Jeff Schulze, investment strategist at ClearBridge Investments, told Yahoo Finance. He added that he expects the Fed to start charting a path towards reducing its asset purchase program as early as August or September, but that the actual reduction is unlikely to start until next year. .
For now, the Federal Reserve has continued its quantitative easing with asset purchases at a rate of $ 120 billion per month and interest rates close to zero, and has maintained that it believes inflationary pressures would prove to be transitory.
“The reopening of the economy continued as COVID cases declined and all near real-time indicators of economic activity improved markedly,” Ian Shepherdson, chief economist at Pantheon Macroeconomics wrote on Tuesday. . “Unemployment, however, remains high, despite some 3.5 million people still out of the workforce, compared to pre-COVID levels.”
“The Fed, in short, is not yet in a position to declare that ‘further substantial progress’ – the test to start reducing its asset purchases – has been made,” he added. “The question of markets and President Powell [Wednesday], however, is whether enough progress has been made to allow the Fed to start talking about phasing out. ”
6:20 p.m. ET Tuesday: Stock futures drift higher
Here’s where the markets were trading Tuesday night:
S&P 500 Futures Contracts (ES = F): 4,249.25, +2.75 points (+ 0.06%)
Dow Futures (YM = F): 34,306.00, +18 points (+ 0.05%)
Nasdaq Futures (NQ = F): 14,046.75, +16.5 points (+ 0.12%)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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