Inventory futures greater than Dow, S&P fall on a dropping streak after Fed resolution
US stocks are likely to soar for a second day as fears of a crisis in the Chinese real estate market subsided and the US Federal Reserve maintained current monetary stimulus for a little longer.
Futures contracts pegged to the Dow Jones Industrial Average gained 238 points, or 0.6%. S&P 500 futures rose 0.6% and Nasdaq 100 futures rose 0.6%.
Stocks related to a global economic rally rose in pre-trading hours. Freeport McMoRan shares gained 3.5%. Las Vegas Sands, which has a large exposure to China, rose 1.5%. Caterpillar added almost 1%. Energy stocks were also higher.
Hong Kong’s Hang Seng index rebounded more than 1% from losses this week, with Chinese real estate developer Evergrande Group gaining more than 17%. On Wednesday, the company eased fears somewhat by deciding to pay a local bond.
However, global investors are still waiting to see if the company will pay $ 83 million in interest on a US dollar bond due Thursday. State regulators have ordered Evergrande to avoid short-term dollar bond defaults, Bloomberg News reported, citing a familiar.
At the same time, the Wall Street Journal reported Thursday that the Chinese government is calling on local authorities to prepare for a “possible storm” if Evergrande fails. US futures peaked according to the WSJ report.
The Department of Labor reported Thursday morning that initial jobless claims rose last week as the US labor market continues its recovery from last year’s recession. There were 351,000 claims last week, beating the estimate of 320,000. The reading for the week before was 332,000.
Shares closed higher across the board on Wednesday after the Federal Reserve left policy rates unchanged while signaling no immediate intention to end economic policy.
The Dow gained around 340 points, or 1%, for its first positive session in five and the best day since July 20. The S&P was up 0.95%, also posted a four-day losing streak, and had its best day since July 23. The composite ended the session 1.02% higher while the Russell 2000 outperformed the session by 1, 48% increase.
“If progress continues broadly as expected, the committee believes that moderation in asset purchases may soon be warranted,” a Fed statement said after the meeting. However, no schedule was given.
The central bank ran a $ 120 billion-a-month bond purchase program last year as the pandemic paralyzed the economy. As economic conditions improve, more members of the Federal Reserve’s Open Market Committee are now seeing the first rate hike in 2022.
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“The Fed has taken a positive note, recognizing that the economy is strong enough to stand on its own two feet and the central bank can begin removing the monetary stimulus it has provided since the beginning of the Covid crisis,” said Chris Zaccarelli, Chief Investment Officer of the Independent Advisor Alliance.
“While there could be some additional turmoil this fall, we are generally constructive about the US economy and believe that it would be worth buying any dips as fundamentals are still solid and the recession is more than at this point Seems to be a year away, ”he added.
Wednesday’s move wasn’t enough to keep stocks green for the week, however. The Nasdaq Composite is down 0.98% for the last three sessions, while the S&P and Dow are down 0.84% and 0.94%, respectively.
For the month, the S&P 500 and the Dow are both down about 3% and the Nasdaq is down 2%.
“We believe the S&P 500 has more headroom, but one of the biggest downside risks comes from valuations given the prospect of higher yields / ERPs, less liquidity and slower growth,” UBS said in a recent statement to clients.
Several companies are on deck on Thursday for quarterly updates, including Darden Restaurants, which will report before market opens, while Nike and Costco Wholesale will provide quarterly updates after market closes. Flash estimates for September Manufacturing PMI and Services PMI are also released.
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