Stock futures rose Wednesday morning as investors awaited a closely watched report on inflation. The move higher extended a recovery rally from a day earlier, with markets at least temporarily finding relief in assurances from Federal Reserve Chair Jerome Powell that the central bank would step in as necessary to rein in rising prices.
Contracts on the S&P 500 ticked up. Nasdaq futures also added to gains after the Nasdaq Composite closed higher by 1.4% on Tuesday. This marked the index’s best day in three weeks, as technology stocks rebounded from recent declines.
Powell’s renomination hearing before the Senate Banking Committee was a key focus for investors this week, with the central bank leader reiterating that the Fed would use its policy tools to bring down stubbornly elevated prices.
“If we see inflation persisting at high levels, longer than expected, if we have to raise interest rates more over time, then we will,” Powell said during the hearing.
The central bank previously telegraphed it was eyeing three interest rate hikes this year to bring benchmark rates up from their current near-zero levels. However, some top Wall Street firms have predicted the Fed will raise rates four times given the current inflationary backdrop.
And the latest inflation reports are expected to continue coming in hot. The Bureau of Labor Statistics is set to release the December U.S. Consumer Price Index (CPI) Wednesday morning, which is expected to show prices jumped 7.0% during the same month last year in the biggest jump since 1982.
But though Powell doubled down on the Fed’s goal of curbing inflation and using interest rate hikes as a tool to achieve this, he revealed little further about the Fed’s plan to begin shrinking its nearly $9 trillion balance sheet. The Fed’s December meeting minutes last week suggested central bank officials were beginning to discuss drawing down the Fed’s balance sheet after nearly two years of asset purchases to help support markets during the pandemic. Powell did reiterate in his hearing he expected the balance sheet runoff process would begin this year.
“I think the biggest comment on most investors’ minds that we talk to around the world would be a ‘policy mistake’ that the Fed might be too aggressive,” Brian Belski, BMO Capital Markets chief investment strategist, told Yahoo Finance Live on Tuesday. “Mr. Powell basically came out today and said this is going to be a process … with respect to how long this is going to take, and I think that’s what’s calming investors.”
Though prospects of higher borrowing costs and tighter financial conditions have stirred up volatility in U.S. equities and tech stocks especially in recent sessions, Tuesday’s session saw a reversal, with the tech-heavy Nasdaq Composite sharply outperforming.
“The issue with tech, I would argue, is not so much one of a little extra duration exposure because growth is further away, but it’s simply one of valuation,” Simeon Hyman, ProShares Global Investment Strategist, told Yahoo Finance Live on Tuesday. “And indeed those top-heavy, largest-cap tech stocks perhaps just were a little bit expensive going into the end of last year and the beginning of 2022. But don’t completely rule out good growth stories because that is the biggest defense against inflation. It is the growth of earnings and dividends.”
7:15. a.m. ET Wednesday: Stock futures gain ahead of CPI report
Here’s where markets were trading before the opening bell on Wednesday:
S&P 500 (^GSPC): +5.5 points (+0.12%) to 4,710.50
Dow (^DJI): +41 points (+0.11%) to 36,169.00
Nasdaq (^IXIC): +32.75 points (+0.21%) to 15,863.75
Crude (CL=F): +$0.73 (+0.9%) to $81.95 a barrel
Gold (GC=F): -$1.80 (-0.10%) to $1,816.70 per ounce
10-year Treasury (^TNX): -0.1 bps to yield 1.745%
6:09 p.m. ET Tuesday: Stock futures open slightly higher
Here’s where markets were trading Tuesday evening:
S&P 500 futures (ES=F): +0.5 points (+0.01%), to 4,705.50
Dow futures (YM=F): +2 points (+0.01%), to 36,130.00
Nasdaq futures (NQ=F): +3.5 points (+0.02%) to 15,834.50
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter