Bank earnings are set to continue on Thursday with companies including Bank of America (BAC), Morgan Stanley (MS) and Citigroup (C) posting quarterly results before the opening bell.
Equity futures opened minimal changed Wednesday night after one more uneven meeting in the business sectors, with another group of banking profit and work market and inflation data to be delivered on Thursday. Agreements on the S&P 500 embraced the level line. Prior, both the blue-chip index and the Nasdaq shut the meeting higher, drove by a leap in technology stocks as government security yields withdrew after a new run-up. The decrease in yields – with the 10-year benchmark yield slipping underneath 1.55% from a high of 1.62% recently – additionally pushed the financial sector, which was the biggest low poke in Wednesday, to decay the S&P 500.
The results will follow a strong report from JPMorgan Chase on Wednesday. America’s largest bank by assets posted third-quarter results that handily topped estimates. Investment banking revenues picked up more than expected, and a strengthening economic backdrop enabled the firm to release more than $2 billion in credit reserves previously set aside to protect against potential customer defaults.
As earnings season rolls on in the coming weeks, investor focus will be fixed on companies’ commentary around prices increases, supply chain disruptions and labor challenges. All of these factors have been seen as contributing to an earnings slowdown compared to the second quarter. However, how long-lasting these challenges prove to be, and which companies will ultimately be hit the hardest by these factors, has been a central question for investors.
At the macro level, inflation has already lasted for months across various pockets of the economy. The Bureau of Labor Statistics’ (BLS) September Consumer Price Index (CPI) rose 5.4% in September compared to last year, coming in at its fastest pace since 2008. A jump in prices for rent, groceries and energy saw especially notable increases. On Thursday, the BLS is set to release its Producer Price Index (PPI), which is expected to show that selling prices for producers increased by 8.7% in September over last year, or the fastest rate on record in data spanning back to 2010.
Policymakers at the Federal Reserve have largely asserted that inflation during the recovery will prove transitory, and will wane as soon as supply bottlenecks ease. However, the string of above-target inflationary readings this year has called into question officials’ views on short-lived price pressures, and contributed to concerns that the central bank may need to act more quickly and aggressively than so far telegraphed to bring inflationary pressures in line.
“What we are seeing is an economy that continues to run hot,” Jeff Klingelhofer, Thornburg Investment Management’s co-head of investments, told Yahoo Finance Live. “Consumers today still have elevated savings, and they’ll be drawing that down in the months to come. And so really we are absolutely seeing higher wages trickling into the economy … The key to watch will be, as the economy continues to heal, as vaccinations continue to increase and businesses open, whether that trend continues.”
“We’ll be watching those wage numbers exceptionally carefully — they really are the key to trying to figure out where the Fed goes and whether this inflation is transitory in nature,” he added. “But at this point we think it will moderate in the months and quarters to come.”
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