Dow futures turned down Tuesday morning, after being up slightly from overnight trading as investors set their sights on a prolific week in Washington that includes the Federal Reserve’s final policy-setting meeting of 2021, set to commence today, and the release of new prints on retail sales, housing starts and other economic data.
Contracts on the Dow turned down 100 points to 35,544.00, while S&P 500 and Nasdaq futures continued to edge lower.
Research from Goldman Sachs showed the S&P 500 is powered by five stocks that have accounted for 51% of its return since the end of April. Microsoft, Google, Apple, Nvidia and Tesla account for more than one-third of the S&P 500’s 26% return this year, according to Goldman.
Traders are awaiting a decision from the Fed on how quickly the central bank will tighten monetary policy amid a backdrop of fresh inflation numbers that reflected the fastest annual increase in nearly four decades. The Labor Department’s Consumer Price Index (CPI) soared 6.8% in November compared to last year, according to figures published last week.
The Federal Open Market Committee (FOMC) is scheduled to hold its two-day policy-setting meeting starting on Tuesday, followed by the release of the monetary policy statement and remarks from Federal Reserve Chair Jerome Powell Wednesday. An updated Summary of Economic Projections outlining individual members’ outlooks for economic conditions and interest rates is set to accompany the statement.
The Fed has been under pressure to control rising inflation levels, as investors watch for clues of a faster taper that could set the stage for earlier rate hikes.
“Because inflation expectations do appear to be adaptive, our view is that the longer inflation stays elevated, the greater the risk that consumers adjust their behaviors in a way that contributes to persistently elevated inflation” wrote PIMCO economist Tiffany Wilding in a recent note to clients.
“We believe the Fed will want to manage this risk by shortening the time over which it winds down its purchases of U.S. Treasuries and agency mortgage-backed securities (MBS), aiming to end the program in March 2022, while also signaling a June rate hike is likely,” said Wilding.
PIMCO managing director and portfolio manager Sonali Pier also separately told Yahoo Finance Live that the firm expects to see two hikes in 2022, three hikes in 2023, and potentially four in 2024, with the Fed trying to bring the policy rate to neutral.
“Amid proliferating signs of solid growth and a robust job market, various measures depict a deeply troubled economy,” wrote Oxford Economics senior economist Bob Schwartz in a new report. “Households are downbeat, according to sentiment surveys, and the so-called ‘misery index‘ that adds together inflation and unemployment hovers around recession levels.”
Markets await a trove of fresh economic data this week. November retail sales, out on Wednesday, are expected to rise by 0.8%, according to Bloomberg consensus estimates. And November housing starts are forecasted to see a month-over-month increase of 3.3%.
Meanwhile, Morgan Stanley projects the U.S. unemployment rate will drop to 3% in 2022.
“It’s stunning to see how much the rate has fallen in the last five months,” Morgan chief U.S. economist Michael Feroli told Yahoo Finance Live. “We expect that pace of decline to slow, but it doesn’t take much to get below 4%, even with a tick up in the labor participation rate which has been depressed over the last year and a half.”
9:05 a.m. ET: Stock futures tick down
Here were the main moves in futures trading Tuesday morning:
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S&P 500 futures (ES=F): -28.50 points (-0.64%), to 4,640.25
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Dow futures (YM=F): -100 points (-0.28%), to 35,545
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Nasdaq futures (NQ=F): -170 points (-1.06%) to 15,912
8:48 a.m. ET: Wholesale inflation surges 9.6%
Wholesale prices soared by a record 9.6% in November from a year earlier, the fastest annual pace on record for the indicator and a sign inflation pressures are likely to persist well into 2022.
The Labor Department reported Tuesday that its producer price index rose 0.8% in November after a 0.6% monthly gain in October. The figure, which measures inflation before it reaches consumers, marked the highest monthly reading in four months.
Food prices jumped 1.2% in November after falling 0.3% in October. Energy prices were up 2.6% after a 5.3% percent rise October.
7:07 a.m. ET: Stock futures mixed
Here were the main moves in markets in early trading Tuesday:
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S&P 500 futures (ES=F): -8.25 points (-0.18%), to 4,660.5
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Dow futures (YM=F): +22.00 points (0.06%), to 35,667
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Nasdaq futures (NQ=F): -85.25 points (0.53%) to 15,996.75
6:00 p.m. Monday ET: Stock futures edge higher
Here were the main moves in markets in late trading on Monday:
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S&P 500 futures (ES=F): +5.50 points (0.12%), to 4,674.25
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Dow futures (YM=F): +46.00 points (0.13%), to 35,691
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Nasdaq futures (NQ=F): +10.75 points (0.07%) to 16,092.75
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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