US Stocks Tick Higher as Expectations for Tapering Rise

27 May 2021 · 3rd Party Analysis

US Stocks Tick Higher as Expectations for Tapering Rise


In Summary

  • Stocks advanced on Wednesday as investors grow comfortable with Fed’s approach to the economy
  • GameStop climbed 16%, while AMC Entertainment jumped 19%

The equity market edged higher on Wednesday as growing comfort with the prospect of higher inflation has calmed investors. Stocks turned moderately to the upside yesterday on news that the Federal Reserve could soon start discussing whether to scale back the stimulus that’s being injected into the US economy every month.

Fed policymakers this week have been more actively commenting on the central bank’s monetary policy actions amid looming concerns that the current approach will overheat the rapidly growing economy. Yesterday, San Francisco Fed President Mary Daly told CNBC that Fed officials are “talking about talking about tapering”, implying the policy change is not imminent. “But I want to make sure that everyone knows it’s not about doing anything new,” she added.

Her remarks were aligned with earlier statements from Fed Vice-Chair Richard Clarida who said on Monday the Fed will maintain the economic support despite a near-term bout of inflation, but it will also consider tightening if it sees inflation moving significantly above the 2% target.

The stock market took the comments favourably as investors are growing more confident in Fed’s approach to handling the current market environment threatened by inflation, which, in the best-case scenario, will be transitory.

Another Comeback for Meme Stocks

On Wednesday, all three major indexes pushed higher, with the Nasdaq Composite leading the pack. The tech-focused index rose 0.59%, or 80.82 points, to 13,738.00. The S&P500 advanced 0.19%, or 7.86 points, to 4,195.99. The Dow Jones Industrial Average was essentially flat and ended the session positive by 0.03%, or 10.59 points, to 34,323.05. The blue-chip 30-stock index yesterday celebrated its 125th anniversary since it was launched on May 26, 1896, at 40.94 points and included 12 companies.

Meme stocks on Wednesday pushed higher with GameStop staging a comeback, adding $33.13, or 16%, to $242.56. AMC Entertainment advanced $3.15, or 19%, to $19.56. A new page appeared on GameStop’s website, advertising nonfungible tokens (NFTs). The news stoked speculation that the gaming retailer is building an NFT platform on the Ethereum network.

In corporate news, Tesla is considering paying in advance for chips to secure a consistent supply of the material amid a global shortage. The EV maker is now discussing the chip supply with operators in Taiwan, South Korea, and the US. The shortage of crucial material was cited as one of the major setbacks for Tesla during the first quarter of the year.

Amazon agreed to acquire the Hollywood studio MGM in a deal worth $6.5bn. The step comes as part of Amazon’s efforts to jump-start its Prime Video streaming platform and position it to better compete with Netflix, the leading streaming service in the industry, and Walt Disney Co. By buying MGM, Amazon will get a library of over 4,000 films, including blockbusters like all James Bond movies and the Rocky franchise.

On the cryptocurrency front, Bitcoin yesterday rose to levels near $39,000, up 3.4%, or $1,120. The digital asset advanced nearly 9% to a session high of $40,800, but later it gave away the gains and subsided below the $40,000 threshold. Bitcoin is lower by 33% this month, but still positive by 29% since the start of the year.

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