The Thursday Market Minute
- Global stocks extend gains as Fed minutes reiterate a commitment to low rates and liquidity support while trillions in government stimulus continues to boost near-term economic prospects
- Fed Chair Jerome Powell will participate in an IMF-lead panel on the global economy today at noon Eastern time after minutes suggest broad agreement on low rates and transitory inflation pressures.
- Benchmark 10-year note yields, as well as the U.S. dollar index, ease to two-weeks lows in the wake of the dovish minutes.
- Treasury Secretary Janet Yellen unveils details of a corporate tax overhaul that could hit big tech companies and raise $2 trillion over ten years.
- CDC data shows 64.4 million Americans have now been fully vaccinated against the coronavirus, with around 171.5 million doses administered as of Wednesday.
- U.S. equity futures suggest a modestly firmer open on Wall Street after weekly jobless rise to 744,000 and better-than-expected fourth quarter earnings from Constellation Brands.
U.S. equity futures edged higher again Thursday, with the S&P 500 extending its record high close, amid a rally in global stocks fueled by central bank support, trillions in government stimulus and accelerating coronavirus vaccine programs.
Gains were capped, however, by a weaker-than-expected reading of weekly jobless claims, which jumped to 744,000 for the period ending March 27, well ahead of economists forecasts of a 680,000 tally.
The key leg of the stool supporting the currency equity market rally, which has lifted the S&P 500 more than 77% from its March 2020 lows, was bolstered yesterday by minutes from the Federal Reserve's March policy meeting that showed consistent messaging on the pledge to keep interest rates at near-zero percent until at least 2023 while continuing to purchase $120 billion worth of government, agency and corporate debt each month.
"Participants agreed that the economy remained far from the (central bank’s) longer-run goals and that the path ahead remained highly uncertain," minutes from the Fed's March 16 meeting read, and although a few dissenting voices suggested rate hikes could come as early as 2023, market reaction to the 'stay the course" message was notable, with the S&P 500 closing at a record high 4,079.95 points and benchmark 10-year note yields easing to a two-week low of 1.65%.
Fed Chairman Jerome Powell may expand on this stance when he speaks at noon today in a debate on the global economy during the International Monetary Fund's Spring Meetings, but the combined impact of record low rates and trillions of stimulus -- as well as the chance that the U.S. could reach 'herd immunity' from COVID-19 in the coming weeks -- is lifting both domestic and global stocks heading into the start of trading on Wall Street.
Futures contacts tied to the Dow Jones Industrial Average suggest a modest 22 point decline for the 30-stock average, while those linked to the S&P 500 are priced for an 11 point advance that would bring the benchmark closer to the 4,100 point level.
Lower Treasury bond yields are also supporting Nasdaq Composite futures, which are priced for a 105 point opening bell jump, but gains were somewhat capped by plans unveiled by Treasury Secretary Janet Yellen to overhaul the U.S.' corporate tax structure in a bill that could take a big bite out of profits that tech giants such as Apple (AAPL) - Get Apple Inc. Report, Microsoft (MSFT) - Get Microsoft Corporation Report, Google (GOOGL) - Get Alphabet Inc. Report and Facebook (FB) - Get Meta Platforms Inc. Report earn overseas.
U.S. stimulus also seems to be supporting markets in Europe, where stocks hit another all-time high Thursday despite an uneven vaccine rollout and lingering questions over the safety of the AstraZeneca/Oxford University dose.
The Stoxx 600 was marked 0.32% higher on the session in mid-morning trading, while the FTSE 100 added 0.2% in London, with miners and banking stocks leading the advance.
Overnight in Asia, a worrying rise in COVID infections in India, as well as the prospect of a mini-wave of new cases in Japan, capped gains for regional stocks in an otherwise bullish session, with the MSCI ex-Japan index rising 0.45% and the Nikkei 225 closing 0.07% higher at 29,708.98 points.
Away from equities, the U.S. dollar index, which has been tracking closely to benchmark Treasury bond yields, slipped to a two-week low of 92.13 in overnight trading as investors absorbed the dovish Fed minutes, while the CME Group's FedWatch tool suggests only a 10% chance of any rate hike between now and the end of the year.
Oil prices were little-changed in early European dealing following yesterday's stockpile update from the Energy Department, which showed a 3.5 million barrel decline in domestic crude supplies that offset a surprise 4 million barrel increase in gasoline stocks, raising questions over the strength of consumer energy demand heading into the summer months.
WTI contracts for May delivery were marked 13 cents lower on the session at $56.64 per barrel while Brent contracts for June, the global benchmark, slipped 18 cents to trade at $62.80 per barrel.