Wall Street set to open flat after record-setting rally

By Yashaswini Swamynathan

(Reuters) - U.S. stocks were set for a sedate open on Wednesday, a day after investors powered the S&P 500 and the Dow to record highs amid growing optimism about the economy.

Easing political tension in Japan and Britain and increased prospects of central banks providing stimulus post Britain's vote to leave the European Union have also helped reduce some uncertainty in global markets.

That sparked a broad rally on Tuesday that also led to the S&P 500 and the Dow notching new closing highs, and the Nasdaq to turn positive for the first time in 2016.

Dow e-minis were up 8 points, or 0.04 percent at 8:19 a.m. ET (1219 GMT), with 21,555 contracts changing hands.

S&P 500 e-minis were up 1.75 points, or 0.08 percent, with 166,895 contracts traded.

Nasdaq 100 e-minis were up 7 points, or 0.15 percent, on volume of 14,417 contracts. The index is just 4 percent away from breaching its record high.

Now, with the U.S. corporate earnings season ready to kick off in earnest, investors will peruse the results and outlooks to see if stocks justify their market valuations.

"After the substantial rally, the markets are now looking for added fuel. Earnings and the ensuing comments that companies make are going to be the judge and jury as to where we go from here," said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

The S&P 500 is currently trading at 17.3 times forward earnings, compared with its 10-year average of 14.7, according to StarMine data.

While second-quarter earnings are expected to fall 5 percent, along the same lines as the first, growth is expected to occur throughout the second half of 2016.

Shares of American Airline rose 1.13 percent to $35.05 after the company provided a more upbeat second-quarter forecast. The airline was the top percentage gainer among S&P 500 components.

Juno Therapeutics soared 24 percent to $34.50 premarket after the U.S. health regulators removed a clinical hold on a trial for its cancer drug.

Another boost to the stock markets has been the hesitance by the U.S. Federal Reserve to hike interest rates. Several officials, including the presidents of the Minneapolis and St. Louis Feds, have suggested the central bank was unlikely to raise interest rates in the near term.

The Fed at 2 p.m. ET will release its so-called Beige Book, a collection of remarks on the health of the economy, which investors will parse to see if fundamentals remain strong.

KFC and Pizza Hut restaurant chains owner Yum and railroad operator CSX Corp are scheduled to report results after the close.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D'Souza)