US Equities Climb to New Record Ahead of Fed Meeting

16 Mar 2021 · 3rd Party Analysis

US Equities Climb to New Record Ahead of Fed Meeting

WRITTEN BY ThorFX

In Summary

  • The equity market ticks higher to a new record
  • Focus on the Fed meeting on Wednesday

Stocks on Wall Street notched another record while US bond yields dropped on Monday. Investors cheered the positive developments over the stimulus bill as they keep their eye on the upcoming Federal Reserve meeting on Wednesday this week.

The S&P500 index climbed 0.65%, or 25.60 points, to close at a record high of 3,968.94. The blue-chip index moved to the upside, led by large-cap tech names like Apple, Tesla, and Facebook, all higher by around 2%. Other sectors that contributed to the leg up in the S&P500 were utilities, real estate, airlines, and companies that rely on consumer spending. Nasdaq Composite, the tech-heavy benchmark index, rose a little over 1%, or 139.84 points, to close at 13,459.71, or about 5% from its all-time peak reached in mid-February. The Dow Jones Industrial Average closed higher by 0.53%, or 174.82 points, and ended the session at 32,953.46. While stocks were inching further, US Treasuries recovered slightly from their lows made in the previous week.

Investors’ focus remains on the bond market as yields pulled back from last week’s high. Fear that recovery through the relief package will bring a sharp rise in prices is causing market jitters. The $1.9tn pandemic stimulus plan for the US has lifted hopes for a booming economy in the second half of the year, but at the same time, it is raising inflation concerns.

President Biden Sets Out Key Targets

The faster economic growth could also accelerate, underpinned by President Joe Biden’s efforts to vaccinate all eligible Americans by May 1. Late on Monday, President Biden appeared in a video posted on the Presidential Twitter account where he pledged to reach two goals in the next 10 days: “100 million shots in people’s arms and 100 million checks of $1,400 or more in people’s pockets within the next 10 days”, Mr. Biden said.

Next on the agenda for investors is the two-day meeting of the Federal Open Market Committee or the FOMC. The meeting will be closely monitored by market participants as they will expect to hear what the Fed plans to do about soaring inflation expectations. Jerome Powell, Federal Reserve Chairman, will address key issues related to the Fed’s policies, rising bond yields, the path to economic recovery, and the creation of more jobs.

According to the White House administration, the economic relief is expected to create around 7 million jobs across the states. The $1.9tn aid package includes $1,400 one-time direct payments to Americans earning up to $75,000 per year. A large portion of these payments, according to a survey by Deutsche Bank, is expected to end up in stocks. The study suggests that of the total $465bn in direct payments, some 35%, or $170bn, could be invested in the US equity market. In addition, stimulus checks recipients are also expected to plow a significant amount of their checks into the cryptocurrency market, which has also been booming this year.

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