A big inflation jump saw stocks edge down from highs yesterday as the debate over how the long Fed can keep policy loose resurfaced. U.S. equity futures are shaking off some of the concerns this morning, with the Nasdaq and S&P 500
up 0.4% and
0.1%, respectively, while the DJIA trails behind,
down slightly at 0.1%. Higher-than-expected inflation data wasn't the only thing to weigh on stocks, which greeted the Q2 earnings season with little fanfare.
Snapshot: Financial powerhouses JPMorgan (
JPM) and Goldman Sachs (
GS) both beat profit and revenue estimates on Tuesday, but their shares pulled back during the session. Some are attributing the decline to a peak in the expansion cycle, which has historically been preceded by a subpar performance in stocks, according to data compiled by S&P Dow Jones Indices. More bank earnings are due this morning, including results from Bank of America (
BAC), Citigroup (
C) and Wells Fargo (
WFC).
"The peak percentage rate of growth is likely in the second quarter. But I am looking for peak optimism, which is based on how much the estimates are going up after companies report," added Nick Raich, CEO at The Earnings Scout. "It's not just the direction, it's the magnitude. If estimates go up at a decreasing rate, that's when we know we hit peak optimism."
Elsewhere: Democrats on the U.S. Senate Budget Committee reached an agreement on a $3.5T human infrastructure investment, which could be included in a budget resolution to be debated later this summer. While the price tag falls short of a $6T package previously sought by progressives, it's in line with President Biden's $4T economic agenda. Lawmakers are also working on a $600B bipartisan package for physical infrastructure, which Biden has confirmed is not dependent on the other infrastructure initiative.