Stock futures drift lower after reaching record highs

Stock futures pulled back slightly Monday evening after a record-setting session.

Each of the S&P 500, Dow and Nasdaq rallied to fresh highs on Monday as more corporate earnings results exceeded expectations and defied concerns over ongoing supply chain constraints, shortages and cost pressures. 

Clorox (CLX) became one of the latest major names to top estimates in results posted Monday after the closing bell, with the cleaning supplies and home goods company topping third-quarter sales and profits estimates and reaffirming its full-year guidance even as the company said it expects “cost pressures to persist.” Shares of Avis (AVIS) and Simon Property Group (SPG) also jumped, with both of these companies posting quarterly earnings that exceeded expectations after market close. 

Heading into this week, the expected earnings growth rate for the S&P 500 was at 36.6% for the third quarter, which while a step down from the second quarter’s rate, would still mark the third-highest pace in data spanning back to 2010, according to FactSet. 

“I don’t think what’s going on is terribly surprising,” when it comes to the sizable year-over-year earnings growth many companies have reported for the third quarter, Pacer ETF’s President Sean O’Hara told Yahoo Finance Live. “I think what we need to see going forward is, is it sustainable, or are some of these outside factors going to be a bigger challenge than we expect?”

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“Is inflation and the input costs that the producers are dealing with, is that going to derail things? Is the lack of workers?” he added. “There’re a lot of things out there that could potentially derail the market, especially as you’re making this transition from where we are, which is easy comparables versus last year, to more difficult ones going forward.” 

In addition to the solid backdrop of corporate earnings, an ongoing economic recovery and still-accommodative positioning by monetary policymakers have also helped underpin equities in their march to new highs. For investors, the Federal Reserve’s latest monetary policy decision on Wednesday will help suggest how long the central bank will maintain its current levels of support. Many pundits expect to see the bank begin to pull back the asset purchases that comprised its quantitative easing program that had helped support the recovery, with fresh economic data reflecting a U.S. economy closing in on pre-pandemic conditions. 

“We think that better days are ahead. Earnings are still growing at a pretty healthy clip. There’s a lot of people focusing on peak growth rates. That’s probably not the way to look at it,” Sameer Samana, Wells Fargo senior global market strategist, told Yahoo Finance Live. “From our standpoint, those low interest rates, still stimulative policy and really strong growth are what set the stage for strong equities in the next year.” 

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6:07 p.m. ET Monday: Stock futures edge lower 

Here’s where markets were trading as the overnight session kicked off: 

• S&P 500 futures (ES=F): -2 points (-0.04%), to 4,603.75

• Dow futures (YM=F): -18 points (-0.05%), to 35,8782.00

• Nasdaq futures (NQ=F): -16.25 points (-0.1%) to 15,878.00

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