Equity futures traded slightly higher on Wednesday night to extend gains from a positive session earlier, with the three major indices recovering from some strong selling pressure earlier this month.
Contracts for the S&P 500 moved higher when the overnight session started. Dow and Nasdaq futures also won.
Traders are looking forward to a set of key economic data on Thursday, which will show how strong the consumer was when the latest wave of coronavirus spread across the United States. The Department of Commerce’s retail report in August is expected to show a back-to-back monthly decline in spending, with total sales likely to decline by 0.7% compared to the month after a decline of 1.1% in July, according to Bloomberg data.
“We expect another soft retail report [Thursday], for August, but to put the numbers in context, the control measure – which generates the unsustainable commodity component in total consumer spending – is probably still about 6% above the level in January / February, says Ian Shepherdson, head of the US. economist for Pantheon Macroeconomics, wrote in a note on Wednesday.
He added that a moderation in monthly data after the March jump of almost 9% in monthly sales was “inevitable”, given that people had spent their last round of stimulus checks approved under the American Rescue Plan Act.
“The correction has probably been reinforced by the effect of the Delta variant, which also has depressed spending, but it is impossible to distinguish these two effects with any confidence,” said Shepherdson.
The latest data will also serve as another indicator of the relative strength of economic activity following an initial resumption of growth in late spring and summer. Although many economists have agreed that the overall trend is to reduce growth, the actual extent of the slowdown remains.
This uncertainty has also meant that equity investors closely monitor incoming data for signals about how the economic background can affect the earnings picture for large companies. Among concerns including the Delta variant, ongoing supply chain constraints, labor shortages and a potential political turnaround by the Federal Reserve, the S&P 500 has so far fallen 0.9% in September.
“Stock markets have been positive for seven months in a row, which is quite rare … So yes, investors are rightly worried,” Akshata Bailkeri, Bruderman Asset Management stock analyst, told Yahoo Finance. “But the reason we are seeing this is that the revenue behind many of these companies continues to grow, and that is really what drives these index values higher.”
As FactSet pointed out in its latest weekly report, Consensus analysts are still looking for earnings growth of the S&P 500 of almost 28% for the third quarter. While a slowdown from the growth rate of more than 80% during the second quarter of this year, it would still mark the third highest increase in earnings for the index compared to the previous year since 2010. The third quarter earnings reporting season will pick up next month.
“I do not think that statistics or how long it has been is a good reason [for a market correction]. In general, you need some kind of negative catalyst, “Randy Frederick, Charles Schwab’s CEO of Trading Derivatives, told Yahoo Finance. “What we have right now are not negative catalysts as much as a lack of positive catalysts.”
“I think what has caused some of this recent volatility is that we have had a number of Wall Street companies that have downgraded both GDP estimates and estimates of corporate performance,” he added. “These are just forecasts; they may not turn out to be true. Certainly in the last two quarters, the results of the results have significantly exceeded the expectation field.”
18:10 ET Wednesday: Stock futures open higher
Here were the main movements in the markets as of Wednesday night:
S&P 500 futures (ES = F): +4 points (+ 0.09%) at 4,485.75
Dow futures (YM = F): +23 points (+ 0.07%) to 34,842.00
Nasdaq futures (NQ = F): +9.25 points (+ 0.06%) to 15,413.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck