Wall Street’s main indexes were set for a subdued open on Wednesday as investors stayed away from making big bets ahead of the release of minutes from the U.S Federal Reserve’s January meeting.
The Fed has pledged to pin interest rates near zero until inflation rises to 2% and looks set to exceed that goal, and until the economy also reaches full employment.
That super-easy stance, coupled with the Biden administration’s proposed $1.9 trillion spending bill for pandemic relief, has some analysts warning of a coming surge in inflation.
“While the new package may be large, it will add stimulus to an economy still below potential, and the spending will be spread out over a couple of years,” said Mark Haefele, chief investment officer, UBS Global Wealth Management in Zurich, Switzerland.
“So while a near-term rise in inflation is likely, we expect the Fed to look past that and keep rates on hold.”
Data showed U.S. retail sales rebounded sharply in January after households received additional pandemic relief money from the government, suggesting a pick-up in economic activity after being restrained by a fresh wave of COVID-19 infections late last year.
The Dow notched a record closing high on Tuesday led by gains in cyclical sectors, although concerns over rising interest rates kept the benchmark S&P 500 little changed.
“The reflation trade that has been good for stock markets as it’s driven by optimism around the recovery. But that will only continue to a point and if yields start rising at a rate considered too fast, sentiment will quickly change in stock markets,” said Craig Erlam, senior market analyst at OANDA.
Rising inflation expectations also pushed benchmark 10-year U.S. Treasury yields to their highest level in a year on Tuesday. [US/]
At 8:42 a.m. ET, Dow e-minis were up 6 points, or 0.02%, S&P 500 e-minis were down 2.5 points, or 0.06%, and Nasdaq 100 e-minis were down 48 points, or 0.35%.
Shares in Dow components Verizon Communications Inc and Chevron Corp jumped about 4% each in premarket trading after Warren Buffett’s Berkshire Hathaway Inc disclosed major investments in the companies on Tuesday.
Hotel operator Hilton Worldwide Holdings Inc slipped 1.4% on reporting a third straight quarterly loss as bookings fell due to coronavirus-induced travel disruptions.