By
Steve Muchoki
April 16th, 2024
However, some believe that the stock futures rise and stagnant interest rates might spur the Federal Reserve to discontinue the ongoing stimulus checks.
US stock index futures gained on Thursday’s early morning session after the Federal Reserve left benchmark interest rates unchanged. As part of its move, the central bank also indicated it would also allow stimulus policies to continue. In reaction, the Dow Jones Industrial Average (DIJA) futures contract climbed by 105 points and now has a 340-point gain (1%) in its first positive session in five days. This also marks its best performing day since July 20.
The 30-stock benchmark advanced more than 500 points at one point but eventually closed slightly lower. Furthermore, futures of both the S&P 500 and the Nasdaq 100 were also trading higher. The former rose 0.95%, snapping a four-day losing streak and registering its best performance in two months. The Nasdaq Composite ended its session 1.02% higher, while the Russell 2000 did 1.48%.
Generally, stocks across the board ended the regular trading session in the higher territory following comments from the central bank. After the two-day meeting, a Fed statement read:
“If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.”
Pursuant to this statement, however, there is no timeline given.
Fed May Soon Tweak the Current Interest Rates as Stock Futures Continue to Perform Well
Last year during the heat of the pandemic, the Federal Reserve implemented a $120-billion per month bond-buying program. This was to counteract the effects of a halted economy. However, in the face of a now-improving economy, the Federal Open Market Committee projects the first-rate hike in 2022.
Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, thinks it is only a matter of time before the Fed retracts the monetary stimulus too. He said:
“The Fed struck a positive tone, acknowledging that the economy is strong enough to stand on its own two feet and the central bank can begin removing the monetary stimulus that they’ve been providing since the beginning of the Covid crisis.”
Zaccarelli also added that despite any additional incoming turbulence, the US economy still is strong even as it continues to recover. He noted investors could take advantage of any retracements and the threat of recession is currently not a cause for concern.
However, despite the generally positive optics and performances, the stocks still have some way to go before getting into the green. For instance, the Nasdaq Composite is down 0.98% over the last three sessions. Also, the S&P 500 and Dow Jones are down 0.84% and 0.94%, respectively.
Evergrande, Asia-Pacific Recover Slightly After Days of Losses
Much of this is largely because of the China Evergrande crisis. Although the real estate giant has recently been in debt, it offered a silver lining on Wednesday. After a private negotiation with bondholders, Evergrande announced that it plans to make a domestic bond interest payment on September 23. This assuaged some concerns and saw the company’s shares rise 17%, after initially hitting a 20% high. Furthermore, Asia stocks across the board performed relatively well after days of losses. The Hang Seng Index rose 1.04% in its final trading hour, while other Chinese property developers experienced share upticks. They include China Vanke, 4.49%, Sun Hung Kai, 2.6%, and Country Garden, 7.01%.