Stock futures rise ahead of retail sales data

Stock futures traded slightly higher Wednesday evening to extend gains from a positive session earlier, with the three major indexes recovering from some heavy selling pressure earlier this month. 

Contracts on the S&P 500 moved higher as the overnight session kicked off. Dow and Nasdaq futures also gained. 

Traders are looking ahead to a set of key economic data on Thursday, which will show how solidly the consumer held up as the latest wave of the coronavirus spread across the U.S. The Commerce Department’s August retail sales report is expected to show a back-to-back monthly drop in spending, with overall sales likely to fall by 0.7% on the month after a 1.1% drop in July, according to Bloomberg data. 

“We’re expecting another soft retail sales report [Thursday], for August, but to put the numbers in context, the control measure — which generates the non-durable goods component of total consumers’ spending — probably is still running about 6% above its January/February level,” Ian Shepherdson, chief U.S. economist for Pantheon Macroeconomics, wrote in a note on Wednesday. 

He added that a moderation in the monthly data after March’s nearly 9% jump in monthly sales was “inevitable,” given that people had spent their last round of stimulus checks authorized under the American Rescue Plan Act.

“The correction probably has been magnified by the impact of the Delta variant, which also has depressed spending, but it’s impossible to separate these two effects with any confidence,” Shepherdson said. 

The latest data will also serve as another indicator of the relative strength in economic activity after an initial reopening surge in late spring and summer. While many economists have agreed the overall trend is of decelerating growth, the actual extent of the deceleration remains to be seen.

This uncertainty has also left equity investors closely monitoring the incoming data for signals of how the economic backdrop could impact the earnings picture for major companies. Amid concerns including the Delta variant, ongoing supply chain constraints, labor shortages and a potential policy pivot by the Federal Reserve, the S&P 500 has so far fallen 0.9% in September. 

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“Equity markets have been positive for seven consecutive months, which is quite rare … So yes, investors are rightly concerned,” Akshata Bailkeri, Bruderman Asset Management equity analyst, told Yahoo Finance. “But the the reason why we’re seeing this is because these earnings behind a lot of these companies are continuing to grow, and that’s really what’s driving these index values higher.” 

As FactSet pointed out in its latest weekly report, consensus analysts are still looking for S&P 500 earnings growth of nearly 28% for the third quarter. While a deceleration from the more than 80% growth rate posted in the second quarter of this year, that would still mark the third-highest year-over-year increase in earnings for the index since 2010. Third-quarter earnings reporting season is set to pick up next month. 

“I don’t think statistics or just how long it’s been is a good reason [for a market correction]. Generally, you need some sort of a negative catalyst,” Randy Frederick, Charles Schwab’s managing director of trading derivatives, told Yahoo Finance. “What we have right now is not negative catalysts so much as a lack of positive catalysts.”

“I think what has caused some of this more recent volatility is that we’ve had a number of Wall Street firms that have downgraded both GDP estimates and corporate earnings estimates,” he added. “Those are just forecasts; they may turn out not to be right. Certainly the last two quarters, the earnings results have substantially outperformed the expectations bar.” 

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6:10 p.m. ET Wednesday: Stock futures open higher

Here were the main moves in markets as of Wednesday evening:

• 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

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck