US Stock Futures Mildly Up After Powell Keeps Policy Unchanged

29 Jul 2021 · 3rd Party Analysis

US Stock Futures Mildly Up After Powell Keeps Policy Unchanged

WRITTEN BY ThorFX

In Summary

  • Futures contracts float broadly in a positive area, Dow futures up about 100 points
  • Fed Chair Powell pledges to continue monetary support while interest rates are kept near zero

US equity futures on Thursday were little changed but moderately higher ahead of the regular trading session. Investors appear to be rather comfortable with the remarks shared by Fed Chairman Jerome Powell on Wednesday as stock futures turned from negative to positive before today’s market action. Dow futures indicate a higher open by roughly 100 points, while S&P500 futures are flat. Nasdaq futures are mildly under pressure.

Speaking at a press conference to conclude a two-day FOMC meeting, Federal Reserve Chairman Jerome Powell highlighted key challenges for the US economy and expressed confidence the Fed is well-positioned while the growth prospects remain robust. He reaffirmed Fed’s stance to maintain interest rates near zero and at the same time continuing the asset purchase program.

Chair Powell said Wednesday that while the FOMC continues “to assess progress in coming meetings”, Fed officials are unanimous that the US economy still needs to expand further before the US central bank could unwind its monetary policy stimulus.

“We’re not there. And we see ourselves as having some ground to cover to get there,” Mr. Powell said yesterday. “The economy has made progress toward these goals,” he said, referring to Fed’s goals on maximum employment and stable prices.

While no decision was made about when to scale back Fed’s $120bn in monthly bond purchases, the Fed Chair commented policymakers yesterday had taken their “first deep dive” on how to time the tapering of the monetary stimulus.

“We’re making progress. We expect further progress and if things go well, we will reach that goal,” he said.

Inflation Rises Again in June

Inflation, according to the FOMC statement released after the meeting, is “largely reflecting transitory factors.” Latest Labor Department data showed consumer-price inflation rose 5.4% in June, the fastest monthly rise since August 2008. On that note, Mr. Powell acknowledged in his speech that higher prices have turned more persistent than the Fed had anticipated.

Mr. Powell’s overall statement gave some hints about plans to start reducing the asset purchases as analysts speculate officials could start tapering later this year. The central bank’s next policy meetings are scheduled for Sept. 21-22 and Nov. 2-3.

Meanwhile, the stock market has been trying to maintain the narrative that the economy would continue to expand at a rapid pace with employment moving higher and inflation keeping lower. On Wednesday, however, stocks on Wall Street wavered and ended mixed. The Dow Jones lost nearly 130 points, while the S&P500 traded sideways and slipped under the flatline to end mildly in negative territory. The Nasdaq Composite ended positively by 0.70% as tech companies this week are reporting robust quarterly results.

Facebook delivered a blowout quarterly report saying revenue increased by 56% year over year to $29.08bn. Net income for the social media giant arrived at $10.39bn. The stock, however, slipped 3.5% in overnight trading after Facebook said it expected growth to “decelerate” in the next half of 2021.

Stocks in Europe on Thursday opened on a positive note. Bourses across the continent are trading moderately in the green after the region-wide Stoxx 600 gained 0.66% on Wednesday.

Bitcoin and the crypto market today remain calm and quiet. The leading digital currency has pulled another strong rally in recent days as it has gained over 35% over the last 8 days. Bitcoin’s price now hovers right above the flatline, currently at $40,000 per token.

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