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Dow Futures, Tech Stocks Gain as Fed Officials Play Down Inflation Risk

The Fed stuck to its 'transitory' narrative on inflation yesterday, with officials insisting that no policy changes are imminent despite CPI gains running at the fastest pace since 2009.

The Monday Market Minute

  • Global stocks climb, with European hitting fresh record highs, as soothing inflation comments from the Fed boost market optimism.
  • Fed officials repeat their 'transitory' narrative on price increases, with St. Louis Fed President James Bullard noting "we're not there yet" in terms of discussing policy changes.
  • Bitcoin tops $40,000 after Elon Musk Tweets comments on mining energy use, but slides back under $39,000 in overnight trading.
  • Benchmark 10-year note yields ease to 1.589% in overnight trading while the dollar index slides 0.3% to an early January low of 89.585.
  • CDC data shows 130.6 million Americans have now been fully vaccinated against the coronavirus, with around 286.9 million doses administered as of Monday.
  • U.S. equity futures suggest a firmer open on Wall Street ahead of house price index data at 9:00 am Eastern time.

Wall Street futures edged higher again Tuesday as investors added tech and growth stocks to their portfolios following soothing comments on inflation risks from a trio of Federal Reserve officials and a record high open for markets in Europe.

Benchmark 10-year Treasury note yields held at a two-week low, and traded south of 1.59% in overnight dealing, after Fed Governor Lael Brainard, as well as her colleagues James Bullard and Ralph Bostic repeated the central bank's view that current inflation levels -- the highest since 2009 -- will slow into the end of the year as base effects fade and supply-chain bottlenecks ease.

“I think there will come a time when we can talk more about changing the parameters of monetary policy, I don’t think we should do it when we’re still in the pandemic," Bullard told an event hosted by Yahoo! Finance, adding that “we’re not quite there yet" in terms of discussing any changes in Fed policy.

The steadfast stance from Fed officials -- following a series of tests from market participants -- looks to have buoyed investor optimism Tuesday as investors watch the dollar slip to multi-month lows against its global currency peers while cautiously adding to positions in beaten-down tech and growth stocks.

Futures contracts tied to the Nasdaq Composite index are priced for a 75 point opening bell gain, thanks in part to pre-market advances for Apple  (AAPL) , Tesla  (TSLA)  and Advanced Micro Devices  (AMD) , while those linked to the S&P 500 are indicating a 13 point gain.

Futures tied to the Dow Jones Industrial Average, meanwhile, are indicating a 100 point opening bell gain for the 30-stock benchmark. 

Bitcoin prices were back on the march, as well, rising to just over $40,000 in overnight trading following comments from Elon Musk related to energy use in mining, with prices easing back to around $38,000 in early Tuesday trading.

Oil prices were also in retreat following a multi-day run of gains that lifted Brent crude closer to the $70 mark with traders eyeing talks between Washington and Tehran that could see the Republic re-enter global crude markets.

WTI futures for July delivery were marked 48 cents lower at $65.57 per barrel while Brent contracts for the same month fell 40 cents to $68.06 per barrel.

Overnight in Europe, the Stoxx 600 hit a record high of 447.01 points amid a broader rally in the region, with Germany's DAX rising 0.77% amid a  $22 billion merger between real estate giants Deutsche Wohnen and Vonovia SE that softened the impact of a weaker-than-expected reading for first quarter GDP

In Asia, Japan's Nikkei 225 closed 0.67% higher at 28,553.98 points as the flow-through from last night's rally on Wall Street lifted tech stocks, while the region-wide MSCI ex-Japan index was up 1.6% heading into the final hours of trading.