Stock futures kicked off the overnight session higher Tuesday evening after a mild day of equity market moves, with the S&P 500 and Dow pulling back just slightly from record levels.
Contracts on each of the three major indexes traded slightly above the flatline after 6 p.m. in New York.
Investors this week have been digesting a spate of better-than-expected economic data, with job growth accelerating faster-than-anticipated, an index of service sector activity reaching a record level and manufacturing activity expanding by the most in decades in recent months. The International Monetary Fund upgraded its global growth forecast to 6% this year from the 5.5% rise seen previously, largely reflecting the quick recovery in the U.S. economy.
“Clearly the market today is telling you, don’t try to bend the trend. There’s an upward bias to the market – it’s a fairly strong upward bias and until it breaks, you want to, I think, be heavily in equities,” George Ball, Sanders Morris Harris CEO, told Yahoo Finance. “But when prices do break, the market clearly is seeking some form of new leadership, [so] I don’t think a smart investors would be wise to buy a dip quickly.”
But even given these upbeat signals, inflation concerns that had weighed on investors in recent weeks at least temporarily attenuated, and the yield on the 10-year Treasury note fell back toward 1.65%, or about 10 basis points below last week’s highs.
Investors have also been eagerly awaiting first-quarter earnings season in the coming weeks, with the reports likely to show corporate profits grew in tandem with strengthening economic conditions.
In the near-term, additional incoming signs of economic expansion are likely to continue buoying equities. However, as growth starts to taper after an initial surge off last year’s virus-depressed levels, the march higher in stocks could also take a pause, some strategists warned.
“Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying by systematic strategies and buybacks driving a grind higher,” Deutsche Bank strategist Binky Chadha wrote in a note. “But we expect a significant consolidation (-6% to -10%) as growth peaks over the next three months.”
“We then see equities rallying back as our baseline remains for strong growth but only a gradual and modest rise in inflation,” Chadha added. “Further out, late summer and into the fall we see the risks to inflation as being to the upside.”
6:02 p.m. ET Tuesday: Stock futures edge up
Here’s where markets were trading Tuesday evening:
S&P 500 futures (ES=F): 4,066.25, up 2.25 points or 0.06%
Dow futures (YM=F): 33,330.00, up 15 points or 0.05%
Nasdaq futures (NQ=F): 13,581.75, up 11.75 points or 0.09%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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