The Thursday Market Minute
- Global stocks power ahead following the Fed’s bullish assessment on U.S. growth, which it sees rising at the fastest pace since 1984 this year.
- Fed Chairman Powell’s willingness to tolerate faster near-term inflation, however, has 10-year bond yields at a January 2020 high of 1.73% in overnight trading, pulling rate-sensitive tech stocks into the red.
- CDC data shows 40 million Americans have now been fully vaccinated against the coronavirus, with more than 113 million doses administered as of Wednesday.
- Oil extends slide after EIA reports a bigger-than-expected 2.4 million barrel increase in domestic crude stocks.
- U.S. equity futures suggest a mixed open on Wall Street, with tech stocks pacing declines, ahead of weekly jobless claims data at 8:30 am Eastern time.
U.S. equity futures traded mixed again Thursday, with tech stock set for steep declines amid a surge in Treasury bond yields, as investors react to the Federal Reserve’s forecast of red-hot growth, with faster inflation, as the economy nears its post-pandemic lift-off.
Fed Chairman Jerome Powell added a dovish tone in his post-meeting press conference to what was already an accommodative series of decisions from his Open Markets Committee colleagues, telling reporters that even with growth forecast at 6.5% this year — the fastest pace since 1984 — and headline unemployment likely falling to 4.5%, there won’t be any rate hikes until at least the end of 2023.
The Fed’s tolerance of faster inflation this year, which Powell insisted would be temporary given the COVID disruption to the labor market, set Treasury yields alight in overnight trading, with benchmark 10-year notes touching 1.731%, the highest since January of last year.
That’s put downward pressure on rate-sensitive tech stocks, with futures contracts tied to the Nasdaq Composite indicating a 140 point opening bell decline, lead by 1.3% slide for Apple (AAPL) – Get Report and a 2.3% pullback for Tesla (TSLA) – Get Report.
On the flip side, the Fed’s bullish assessment of U.S. growth, particularly compared with the struggles seen in Europe and elsewhere, and the Biden administration’s successful vaccine rollout, lifted the Dow Jones Industrial Average to a record high close last night, and futures contracts suggest traders will add another 40 points to that at the start of trading.
The S&P 500 also hit a record high close last night, but pre-market decline for the six biggest tech stocks — Apple, Microsoft (MSFT) – Get Report, Amazon (AMZN) – Get Report, Alphabet (GOOGL) – Get Report, Facebook (FB) – Get Report and Tesla — which comprise around 25% of the benchmark’s weight, have futures indicating an early pullback of around 15 points.
Equity volatility, however, looks muted, with the VIX falling below the 20 point mark in overnight trading on the heels of Powell’s ultra-dovish press conference yesterday afternoon.
The U.S. dollar was on the move, as well, rebounding around 0.15% from a two-week low in overnight trading to 91.588 against a basket of its global peers.
Oil prices extended declines for a fourth consecutive session following yesterday’s larger-than-expected 2.4 million barrel increase in domestic crude stocks reported by the Energy Department, as well as the IEA’s assessment of supply/demand dynamics for crude between now and the end of the year.
WTI futures for April delivery fell 60 cents overnight to $64.00 while Brent contracts for May, the global benchmark, fell 60 cents to $67.39 per barrel.
In Europe, the trade-focused German DAX hit an all-time high as auto stocks powered ahead in the draft of Volkswagen’s bullish e-vehicle outlook and the Fed’s assessment of U.S. growth prospects.
In Asia, Japan’s Nikkei 225 closed over the 30,000 point mark following a 1% gain that mimicked last night’s rally on Wall Street, while the region-wide MCSI ex-Japan benchmark was last seen 0.42% higher heading into the final hours of trading.