U.S. equity futures were trading at mixed levels hours before the opening bell Thursday, one day after the Dow finished in record territory crossing the 33,000 plateau for the first time and after comments by U.S. Federal Reserve Chairman Jerome Powell saying the key interest rate would be kept near zero through 2023.
|I:DJI||DOW JONES AVERAGES||34168.09||-129.64||-0.38%|
|I:COMP||NASDAQ COMPOSITE INDEX||13542.118929||+2.82||+0.02%|
Powell's comments at a news conference appeared to reassure investors who worry higher inflation might prompt central banks to raise rates, which would weigh on economic growth.
“The market reaction suggests investors are satisfied with the Fed’s explanations for now,” said Tai Hui of JP Morgan Asset Management in a report. “Inflation is expected to rise in the coming months, and the Fed may need to provide more handholding to the market during this price spike.”
Central banks traditionally respond to higher pressure for prices to rise by hiking interest rates. But Fed officials have said they would let the U.S. economy “run hot” to make sure a recovery is gaining traction.
Before his comments Wednesday, the yield on the 10-year U.S. Treasury bond, or the difference between its market price and the payout at maturity, widened to 1.68%, the highest level since January 2020.
Yields fell and stocks gained after Powell spoke.
The S&P 500 rose to 3,974.12, recovering from a 0.7% slide. The Dow Jones Industrial Average gained 0.6% to 33,015.37. The Nasdaq rose 0.4% to 13,525.20.
Banks, industrial stocks and companies that rely on consumer spending helped lift the market. Those gains outweighed a pullback in health care, utilities and other sectors.
Investors are betting big that the economic malaise will dissipate as spring arrives and more Americans get vaccinated against the coronavirus. The $1,400 stimulus checks the Biden administration began sending to individuals last weekend are also helping. But faster economic activity could also translate into some degree of inflation.
Fed policymakers foresee unemployment falling from 6.2% to 4.5% by year’s end and to 3.9% at the end of 2022.
That suggests the central bank will be close to meeting its goals by 2023, when it expects inflation to exceed its 2% target and for unemployment to be at 3.5%. Yet it still doesn’t project a rate hike then.
Meanwhile, Asian stock markets followed Wall Street higher on Thursday.
Benchmarks in Shanghai, Tokyo and Hong Kong advanced. Sydney retreated.
The Shanghai Composite Index rose 0.6% to 3,465.85 and the Nikkei 225 in Tokyo advanced 0.9% to 30,192.11. The Hang Seng in Hong Kong added 1.5% to 29,474.61.
The Kospi in Seoul advanced 0.7% to 3,068.01 while Sydney's S&P-ASX 200 was off 0.7% at 6,745.90.
India's Sensex rose 0.5% to 50,043.87. New Zealand also declined while Southeast Asian markets advanced.
Investors have been uneasy that inflation might accelerate after governments flooded sagging economies with extra spending and credit to reverse the deepest global slump since the 1930s.
In energy markets, benchmark U.S. crude lost 36 cents to $64.24 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 20 cents on Wednesday to $64.60. Brent crude, the basis for international prices, retreated 41 cents to $67.59 per barrel in London. It declined 39 cents the previous session to $68.
The dollar edged up to 108.90 yen from Wednesday's 108.86 yen. The euro declined to $1.1967 from $1.1979.