(Reuters) -Futures for the S&P 500 and the Nasdaq edged higher on Wednesday as investors assessed cautious commentary from U.S. Federal Reserve Chair Jerome Powell and looked ahead to key economic data later in the week.
While the recent numbers point to a resilient economy, comments from Fed officials have injected some wariness, especially about the labor market. Powell added to the measured tone on Tuesday, noting that asset prices appeared fairly highly valued.
He stopped short of aligning with either camp in the ongoing debate among Fed policymakers, with some pushing for more aggressive cuts to support the jobs market while others urge restraint to avoid reigniting inflation.
Instead, the Fed chair emphasized the delicate balancing act the central bank is faced with to navigate inflation risks while addressing signs of a softening labor market.
At 5.30 a.m. ET, Dow e-minis rose 22 points, or 0.05%, U.S. S&P 500 E-minis gained 11.5 points, or 0.2%, and Nasdaq 100 E-minis added 78.5 points, or 0.3%.
A widely expected 25-basis-point cut last week helped propel equities, but investors are hoping for more easing this year to keep the momentum going.
“The bias is so heavily skewed towards ultra dovishness that any shortcomings in commentary can cause a wobble in sentiment,” Daniela Sabin Hathorn, senior market analyst at online trading firm Capital.com, said in a note.
There has also been concern about inflated stock valuations in some sectors. Only 17% of stocks in the benchmark S&P 500 outperformed the index in the last three months, according to data from Charles Schwab, underscoring the narrow breadth powering the rally.
Investors will closely watch the core personal consumption expenditures data, the Fed’s preferred inflation gauge, due to be released later this week. A hotter-than-expected reading could strengthen the case for a more cautious pace of easing, while a softer print might reinforce bets on additional cuts.
Meanwhile, housing market data due on Wednesday could offer insight into consumer demand and builder sentiment, especially as elevated borrowing costs continue to weigh on affordability.
The sector has been pressured for much of the year and any signs of stabilization could influence broader sentiment.
Markets may also take cues from an upcoming speech by Federal Reserve Bank of San Francisco President Mary Daly, who could shed light on how regional Fed officials are interpreting the latest data and policy signals.
In stocks, Lithium Americas’ U.S.-listed shares surged 67% after Reuters reported President Donald Trump’s administration was weighing taking an up to 10% equity stake in the company.
Memory chipmaker Micron Technology’s shares also rose 1.3% before the open after it forecast quarterly revenue above estimates.
Equities have become increasingly central to household wealth, making market performance a key pillar of consumer confidence.
Household exposure to stocks rose to a record 65.8% in the second quarter, higher than their share at the peak of the dotcom bubble, according to Schwab.
(Reporting by Niket Nishant in Bengaluru; Editing by Pooja Desai)
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