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Stock Futures Wobble Ahead of Fed Minutes

By Will Horner 

U.S. stock futures edged higher Wednesday as investors awaited notes from the Federal Reserve’s last policy meeting for clues on how officials view inflation and the pace of economic recovery.

Futures tied to the S&P 500 index and the Dow Jones Industrial Average ticked up less than 0.1%. Technology-heavy Nasdaq-100 futures rose 0.2%. On Tuesday, indexes pulled back slightly after closing at record highs at the start of the week.

Signs that the economy is rebounding from its coronavirus-driven slump have buoyed investors and helped propel the major indexes to unprecedented levels this week. The rapidly progressing vaccination rollout, combined with both monetary and fiscal support, is aiding in the recovery of the labor market and the manufacturing sector. Money managers are betting that more of the economy will return to a normal footing soon and give a boost to travel and leisure companies.

“We had been expecting the data to improve about this time, and early signals are that the recovery is absolutely on track,” said Hugh Gimber, global market strategist at J.P. Morgan Asset Management. “This is the period where the forecast of a strong recovery in growth is starting to look more like the fact of a strong recovery in growth.”

Some investors remain nervous that the easing of restrictions, coupled with pent-up consumer demand, could drive up inflation and prompt the Fed to raise interest rates sooner than expected.

“When you have all this money that has been pumped into the system and into people’s pockets, but that hasn’t been spent yet, then you know inflation is going to come at some point,” said Brian Walsh, Jr., senior financial adviser at Walsh & Nicholson Financial Group.

Investors are awaiting minutes from the central bank’s March meeting, set to be released at 2 p.m. ET. Policy makers at that time raised their forecasts for growth and inflation, and reiterated that loose monetary policies would remain in place for some time.

Bond yields have stabilized in recent days, after climbing sharply from the start of the year. The yield on the benchmark 10-year Treasury note ticked down to 1.639%, from 1.656% on Tuesday.

The slip in yields has provided some respite for technology stocks, which had come under pressure from the higher borrowing costs. But many investors continue to bet that it will be the economically sensitive sectors such as banks and energy that stand to benefit most from a reopening.

“The value play is still very much on the table as the economy expands,” said Mr. Walsh. “For the last 10 years, everything was about growth stocks, and now we are seeing a changing of the guard.”

U.S. trade data will be released at 8.30 a.m., and are expected to show the trade deficit widened in February, reflecting strong consumer demand for products made overseas and the limited impact of tariffs.

In commodity markets, Brent crude, the international oil benchmark, ticked down 0.6% to $62.41 a barrel.

Overseas, the pan-continental Stoxx Europe 600 gauge was relatively flat.

In Asia, most major stock indexes were mixed by the close of trading. Japan’s Nikkei 225 ticked 0.1% higher while Hong Kong’s Hang Seng fell 0.9%. In mainland China, the Shanghai Composite Index edged down 0.1%.

Write to Will Horner at [email protected]

 

(END) Dow Jones Newswires

April 07, 2021 05:00 ET (09:00 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.

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