Stock futures opened higher Monday evening after a mixed session earlier, as traders awaited a highly anticipated new inflation report.
Contracts on the S&P 500, Dow and Nasdaq were each slightly higher as the overnight session kicked off. During the regular trading day, the S&P 500 and Dow rose to each end five-session losing streaks, while the Nasdaq extended last week’s losses.
On Tuesday, traders are set to receive the Labor Department’s August consumer price index (CPI), which is likely to show a still-elevated level of inflation across consumer goods and services. Consensus economists expect the broadest measure of CPI will grow 0.4% in August compared to July, and by 5.3% compared to August 2020, according to Bloomberg data. In July, the headline CPI grew 0.5% month-on-month and by 5.4% year-on-year, with the latter representing the fastest annual growth rate since 2008.
This inflation data, while likely moderating slightly from July’s levels, will also likely still reinforce the persistent price pressures rippling across the recovering economy. Another heightened print may serve as another data point challenging some Federal Reserve policymakers’ views that inflation will be transitory and recede as the recovery matures. The ongoing price pressures have fueled debates over the timing of the central bank’s start to asset-purchase tapering and other monetary policy adjustments to stave off overheating.
“With the boost from fiscal stimulus fading, real incomes being squeezed by surging prices, and supply shortages showing little sign of easing, the Delta variant is far from the only headwind to the economic recovery,” Andrew Hunter, senior U.S. economist for Capital Economics, wrote in a note on Monday. “We’ve long expected GDP growth to slow more sharply over the second half of the year than others anticipated, and the risks to our forecasts now look skewed to the downside.”
An increasing number of economists have suggested the peak growth rates have already likely passed this year, with easy gains during the earlier stages of the reopening already made. These assessments have coincided with more cautious views on the U.S. equity market for the rest of the year, with slower economic growth likely translating to slower company earnings growth as well. Firms including Bank of America have recently slashed their price targets on the S&P 500 and suggested the index will end the year slightly lower than current levels.
Others have maintained that any pullback could present a buying opportunity.
“It’s been consistent since the pandemic has started, to buy on dips. I definitely don’t see that behavior changing any time soon,” Brian Vendig, MJP Wealth Advisors president, told Yahoo Finance Live on Monday. “I’d still say stay balanced toward equities, but be very selective in making sure that you’re picking the areas that can provide protection to margin, profitability growth, and also as a means to hedge off any unnecessary…
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