Stock futures steady after reaching records as traders mull Fed taper

Stock futures opened little changed Wednesday evening to hold near record highs, with investors contemplating the the Federal Reserve’s decision to begin paring back some of its monetary policy support as the economic recovery progresses further.

Earlier during the regular session, each of the S&P 500, Dow and Nasdaq set record intraday and closing highs yet again, with the Fed’s latest monetary policy decision compounding with optimism over a slew of stronger-than-expected quarterly corporate earnings results. 

The Fed’s decision on Wednesday unfolded the way many investors had been expecting, wherein the central bank formally announced it would begin tapering its pandemic-era asset purchase program starting this month. That came as Federal Open Market Committee members deemed that the economy had made “substantial further progress” in recovering to warrant the gradual removal of this policy support. 

But importantly, the newly announced contours of the Fed’s tapering plan appeared to appease equity traders. 

“The Fed has baked in some flexibility in their tapering,” Ryan Nauman, Zephyr market strategist, told Yahoo Finance Live on Wednesday. “They were very clear that in November and December how much they were going to taper. After that, they did not put in a dollar amount on it.”

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Specifically, the Fed said it would begin reducing its asset purchases this month by a total of $15 billion, and then by another $15 billion in December, but said the outlook for the pace of tapering in the future would depend on “changes in the economic outlook.” Fed Chair Jerome Powell also reiterated his prior stance that the ultimate end of the tapering process next year would not automatically signal the start to interest rate hikes. 

“So they added some flexibility, and a lot of it has to do with the uncertainty around inflation,” Nauman added. “And even though they said inflation is transitory, they added that word ‘expected,’ which kind of hedges their bets a little bit and buys them some more flexibility. And finally I think that [last] piece … is the timeline. They added more transparency, more clarity to the timeline and the markets really liked that … that transparency showing that they’re expecting inflation to start slowing during mid-2022, Q2, Q3.”

Separately Wednesday afternoon, third-quarter earnings season rolled on with a parade of names across industries reporting results. Booking Holdings (BKNG) share rose after third-quarter results pointed to a pick-up in travel trends especially in Europe, with revenue jumping 77% over last year to top Wall Street’s estimates. Semiconductor company Qualcomm (QCOM) also posted better-than-expected quarterly earnings, revenue and guidance, suggesting strong demand was buoying the company despite a global chip shortage and supply chain snarls. Etsy (ETSY), on the other hand, offered a lower-than-expected forecast for the holiday shopping season, with the e-commerce site losing some momentum…