Dow futures drift lower ahead of inflation data, impeachment vote

Dow futures drift lower ahead of inflation data, impeachment vote

U.S. stock-index futures drifted slightly lower Wednesday as investors await data on inflation and a House vote on impeaching President Donald Trump a week before he is set to leave office.

What are major indexes doing?
  • Futures on the Dow Jones Industrial Average

    were down 55 points, or 0.2%, at 30,919.

  • S&P 500 futures

    were off 10.50 points, or 0.3%, at 3,784.

  • Nasdaq-100 futures

    fell 25.75 points, or 0.2%, to 12,864.50.

Stocks struggled for direction Tuesday, flipping between modest gains and losses before finishing to the upside, allowing the Dow
S&P 500

and Nasdaq Composite

to avoid their first back-to-back losses of 2021.

What’s driving the market?

A selloff in the U.S. Treasury market has pushed up bond yields, marking a potential headwind for equities. The yield on the 10-year Treasury note

last week breached the 1% level as expectations President-elect Joe Biden and a Democratic-controlled Congress will push through another large round of aid spending that could spark significant inflationary pressures. That, in turn, could see the Federal Reserve pull back on its aggressive monetary stimulus measures sooner than investors expected.

Inflation-focused investors will watch the December consumer-price index, or CPI, at 8:30 a.m. Eastern. Economists surveyed by MarketWatch look for CPI to show a rise of 0.4%, while the index minus volatile food and energy prices is seen up 0.1%. The annual headline number is expected to have ticked higher to 1.3%, but the core reading, excluding food and energy prices, is likely to remain at 1.6%.

“ If the CPI data today surprises to the upside it can certainly cause problems for stocks as U.S. yields rise further,” said Boris Schlossberg, managing director at BK Asset Management, in a note.

That’s because the stock-market rally has been built on ultralow interest rates, which allow for much higher equity valuations, he said. And while rates remain historically low, “markets are always a relative rather than absolute game and even a 50 basis point rise off a 1% level represents a 50% increase in rates which could then cause massive speculative flows out of stocks — especially those with high multiples,” Schlossberg said, referring to the price-to-earnings ratio.

Investors have largely looked past renewed political rancor in Washington. The Democratic-controlled House was expected to vote Wednesday to impeach Trump for his role in encouraging a violent mob last week to attack the Capitol. A handful of House Republicans, including Wyoming’s Liz Cheney, No. 3 in House Republican leadership, have said they would vote to impeach.

The fate of the impeachment push in the Senate, where a two-thirds majority would be needed to convict and remove the president, is unclear.

The Federal Reserve’s Beige Book report, a compilation of economic anecdotes, is due at 2 p.m.

Several Fed officials are also set to make remarks Wednesday, including Gov. Lael Brainard at 1 p.m. and Vice Chair Richard Clarida at 3 p.m.

Which companies are in focus?

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