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Stock Futures Eye Inflation Data

Stock Futures Eye Inflation Data

European and US futures are trading mostly flat as traders catch their breath following the record close of the S&P 500 and the Dow indices yesterday. There is a lot of optimism among investors and traders as the Senate passed the highly anticipated infrastructure bill worth $1 trillion.

Today is a crucial day for investors as well, as consumer price data is scheduled to be released, which would provide stock traders with insights into the timeline of the inevitable tapering of bond purchases.

Inflation is still expected to rise, but its pace of growth is projected to decline after posting its biggest monthly gain in June since August 2008.

Stock Market

During the last few weeks, investors have been on a roller coaster ride witnessing massive volatility in financial markets. Stock traders have seen strength in earnings, strong economic updates, and a hawkish Fed that all hint at the eventual tapering of stimulus in the next couple of months. The only thing standing in the Fed’s way is the rise of cases caused by the Delta variant as it spreads across the globe.

In yesterday’s session, the Dow jumped 0.46%, or 162.82 points, while the S&P 500 rose 0.1%. Both indices closed at record highs and touched unparalleled intraday highs as well. On the other hand, the Nasdaq, the tech-savvy index, dropped nearly 0.49%, posting negative performance in the last 2 out of 3 days. Tech stocks took a beating after treasury yields grew.

Cyclical stocks, which are positively correlated to economic recovery, got a boost in yesterday’s session, gaining support from the newly passed infrastructure bill, which inaugurates potential new spending of $550 billion in areas such as the electric grid and transportation. The bill has yet to be approved by the House, but Nancy Pelosi, D-Calif., stated that she will hold the bill hostage until the Senate also passes a budget proposal.

Investors should note that the surge in stock markets comes amid a rise in covid cases caused by the Delta variant. This depicts confidence of investors in the ability of authorities to successfully take care of the ever-changing dynamics. An extensive coverage of vaccinations and social distancing measures have helped to curb the contagious variant’s impact, but investors should still remain vigilant as a significant uptick in cases could lead to tighter controls and potentially delay economic recovery.

Coinbase

Coinbase has become synonymous with the cryptocurrency sector and its performance is directly related to digital coins such as Bitcoin. The company outperformed its earnings expectations, posting a revenue of $2.23 billion versus the expected $1.78 billion and earnings per share were $3.45 compared to the expected $2.33. The company’s stock surged nearly 2.1% in Tuesday’s extended trading session. Despite the extreme volatility in the crypto markets, the company was able to post a net profit of $1.6 billion for the quarter and was up nearly 4,900% compared to the same period in 2020.

Investors should be dancing with joy as monthly transacting users grew by nearly 44%, to 8.8 million, in the last quarter, while volume traded jumped to $462 billion and grew by nearly 38% from the previous quarter. This shows the growing interest of institutional investors and retail investors alike in cryptocurrencies. Earlier in the year, Coinbase briefly reached a valuation of 100 billion, a major milestone in the history of the ill-famed digital asset.

Oil

Oil prices rebounded yesterday following the dip on Monday caused by the spread of the Delta variant. Rising demand from western countries, including the United States, outweighed worries about decreasing global demand. The volatility seen in oil markets is likely to be momentary as demand from western countries is back to pre-pandemic levels and this is weighing in on global oil supplies. Crude stockpiles within the United States are projected to have dropped last week as well, depicting a narrowing gap between demand and supply of oil. Brent crude is currently trading at $70.60 per barrel while U.S. oil is trading at $68.29 per barrel.

Gold

After falling nearly 4.4% on Monday, gold prices have found some support as the Delta variant rapidly spreads. However, investors should understand that the precious metal is likely to remain under pressure as the dollar index and treasury yields rise. The market anticipates that economic data released in the near future will point to continued economic recovery, allowing the Fed to tweak its monetary policy by raising its policy rate and beginning to withdraw its highly addictive stimulus. This would have a negative impact on gold prices.

Asian Markets

As of 11:01 p.m. EST, the Nikkei was up 0.65% while the Shanghai Composite Index rose 0.08%. The ASX 200 index jumped 0.47% while Seoul’s Kospi slumped 0.33%. The Hang Seng index in Hong Kong hopped 0.54%.