U.S. stocks opened moderately higher on Wednesday in muted morning trading ahead of the release of the minutes of the Federal Reserve’s March meeting, which could provide clues to the central bank’s strategy if the economic rebound from the coronavirus pandemic gets too hot.
On Tuesday, the Dow fell 96.95 points, or 0.3%, to 33,430.24, the S&P 500 fell 3.97 points, or 0.1%, to 4,073.94, after hitting a daily record of 4081.37, while the Nasdaq Composite fell. 7.21 points, or less than 0.1%, and closed at 13,698.38, completing a streak of three consecutive gains.
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What drives the market?
Optimism about the outlook for the business climate is growing as more Americans receive vaccine doses and Washington seeks to take additional spending measures to help foster a fuller recovery from the coronavirus pandemic.
So far this year, investors have favored assets that perform better at the start of the business cycle, marking what is known as value rotation.
“We have not seen such a rise in value since 2016,” said Diane Jaffee, senior portfolio manager at TCW. “I believe there are cycles of super-growth as well as cycles of overvalue. This did not happen in 2016, but I think that now we are united. “
Investors will await a report on the two-day Fed meeting on March 16-17, due out at 2:00 pm ET, in which policymakers raised their forecasts for US economic growth and inflation, but stressed that adaptive monetary policy will continue. until 2023.
However, the market reversed those forecasts, and bond yields rose quickly this year on expectations that a faster economic recovery from the pandemic could spur inflation.
Market participants, on average, expect a rate hike of four quarters of a percentage point by the end of 2023 from the current range of 0% to 0.25%.
“I think investors are starting to realize that inflation will rise in the short term, but it will not be sustained,” Jeffie told MarketWatch. “However, if the yield curve becomes more positive or the 10-year yield rises, but this is due to economic growth, that is good. This is what we have been waiting for for the last 10 years! ”
While most investors know that massive increases in infrastructure spending will help sectors like materials
Jeffy also believes that banks
a lot goes in their favor, including some technical factors that will increase profits, and some legislative relaxation.
“We expect the protocol to confirm that the Fed is not considering starting a normalization earlier than it promised to do so, which could allow stocks to continue the northern trend,” wrote Charalambos Pissouros, senior market analyst at JFD Group.
“While officials have raised their economic and inflation forecasts – inflation is expected to be 2.4% this year, Fed Chairman Powell has made it clear that this will be temporary and will not meet their standards,” Pissouro wrote.
“He also insisted that it was too early to discuss narrowing. [quantitative easing]But some skeptics expect the Fed to announce plans to cut its bond buying program later this year.
Bond yield growth declined slightly as the yield on 10-year Treasury bonds
about 1.65% on Wednesday morning from 1.72% on Friday. The declining yields on benchmark bonds have boosted interest in technology stocks, which benefit from a low interest rate regime.
Meanwhile, the chairman and chief executive officer of JPMorgan Chase & Co. Jamie Dimon released his annual letter to shareholders on Wednesday in which he expressed an optimistic view of the economy.
“I have little doubt that with excess savings, new savings in stimulus, huge spending deficits, increased quantitative easing, a new potential infrastructure bill, a successful vaccine, and the euphoria after the pandemic is over, the US economy is likely to grow,” the executive wrote. … “This boom could easily last until 2023 because all spending could last until 2023.”
Which companies are in focus?
on Wednesday announced a pledge to spend over $ 2 billion on black-owned businesses by the end of 2025.
- XPO Logistics Inc. XPO said Wednesday that it has over 1,400 jobs in North America and plans to accelerate hiring to meet growing demand. The stock rose slightly after the call.
- LumiraDX Ltd., a diagnostic diagnostics company goes public through a merger with a Specialized Acquisition Corporation or SPAC, CA Healthcare Acquisition Corp.…
in a deal with a notional enterprise value of about $ 5 billion.
- MSC Industrial Direct Co. MSM fell 3.8% in early trading on Wednesday after the metalworking, maintenance, repair and operation (MRO) company posted better-than-expected fiscal second-quarter profit but sales fell.
- AppLovin Corp., APP, a maker of software for mobile app developers, set terms for its initial public offering on Wednesday and plans to offer 25 million shares at prices ranging from $ 75 to $ 85 each.
- Coinbase Global Inc…
on Tuesday released preliminary first-quarter revenue that surpassed $ 1 billion, surpassing last year’s full year, and quarterly profit that approached $ 1 billion. The cryptocurrency trading platform is expected to debut in stock markets next week and will release preliminary results for the January to March period and forecast for the full year of 2021.
How are other assets doing?
- ICE US Dollar Index
the currency against a basket of its six main competitors remained unchanged at 92.34.
- 10-Year Treasury Bond Yield
remained virtually unchanged at 1.66% as traders awaited the Fed’s protocol. Bond yields and prices move in opposite directions.
- Crude oil futures reversed course after the report showed that supplies were lower with the US benchmark.
down 21 cents, or 0.4%, to $ 59.12 a barrel on the New York Mercantile Exchange.
- Gold futures were lower with the June contract.
Comex fell $ 5.60, or 0.3%, to $ 1,737.40 an ounce.
- In Europe, the Stoxx 600 index
fell 0.3%, while the London FTSE 100
- In Asia, the Shanghai Composite SHCOMP closed 0.1% lower on the Hong Kong Hang Seng.
to close 0.9%, while Japan’s Nikkei 225 NIK rose 0.1%.
Read more: Here are ETFs to help you invest in Biden’s infrastructure plan.