According to leading U.S. index futures, we can expect a jump in stock prices at opening on this coming Thursday. This bullish trajectory follows last session’s closing rally. The upswing in the market is largely due to the excitement generated by the Federal Reserve's monetary policy announcement made on the prior day.
Despite speculations, the Federal Reserve held its interest rates steady. Importantly, it also held onto its projection of executing three interest rate slashes this year. Such a forecast, deemed unchanged, celebrates a victory for stock enthusiasts as fears were mounting about the possible fallout of recent inflation data being higher than anticipated, thus leading Fed officials to reassess lowering rates.
Larry Tentarelli, President and Founder of Blue Chip Daily Trend Report, regards today's unaltered interest rate decision by the Federal Open Market Committee (FOMC) and the resulting media briefing as bullish for the equity markets and a proponent of the soft landing scenario. Tentarelli also noted that the unchanged forecast of three cuts for 2024 despite recent higher Consumer Price Index readings stokes optimism for a strong market.
Such optimism carried forward even after the Labor Department unanticipatedly reported a slight fall in first-time claims for U.S. unemployment benefits for the week ending on 16th March.
In last Wednesday’s trading session, after the Federal Reserve's monetary policy announcement, stocks rallied strongly reaching new highs aided by a strong push to the upside. The Dow Jones surged 401.37 points or 1 percent to 39,512.13, the Nasdaq spiked 202.62 points or 1.3 percent to 16,369.41, and the S&P 500 rose 46.11 points or 0.9 percent to 5,224.62.
At the session’s close for the day, the averages stood sharply higher having reached new peaks. The rally on Wall Street was as a result of the Federal Reserve staying its course of keeping interest rates unchanged and its persistent forecast of implementing three rate cuts this year.
The Fed maintained its objective to achieve maximum employment and a 2 percent inflation rate over the long term, hence it held the target range for the federal fund rate at between 5.25 percent and 5.50 percent. This range has remained unchanged since the Fed last raised rates by a quarter-point in July.
Although the Fed still needs more confidence in the inflation rate's sustainable move toward 2 percent before executing a rate cut, projections still indicate three rate cuts for this year alone. Recent projections indicate that the Federal Reserve expects rates to drop to a range of 4.50 - 4.75 percent by the end of 2024.
This interest rate forecast parallels the December forecast and suggests three quarter-point rate cuts in the span of the next nine months. Concurrently, the Federal Reserve officials raised their forecast for rates at the end of 2025, from a range of 3.50 - 3.75 percent, to a range of 3.75 - 4.0 percent.
Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, claimed that this announcement from the Federal Reserve did not reach any "new news," which he attributes as "very bullish for the markets." He further stated this lack of new news signifies continued bullish sentiments.
Zaccarelli also asserted that investor reactions to boosting stock prices were as expected. He anticipates markets will run higher until a new shock hits the system because, in his words, "this Fed isn't going to stand in the way of the bull market."
In other sectors, Airline stocks experienced a significant rise, with the NYSE Arca Airline Index jumping by 3.8 percent after closing at its lowest in over a month on Tuesday. The NYSE Arca Gold Bugs Index also surged by 3.8 percent, reflecting the growing strength in gold stocks as seen with the precious metal's price upswing in after-hours trading.
Banking stocks also witnessed substantial growth, propelling the KBW Bank Index by 2.4 percent to its yearly high closing level. Networking, brokerage, and housing stocks aligned with most of the other major sectors in seeing significant growth.
Coming to Commodities and Currency Markets, Crude oil futures have dipped slightly by $0.13 to $81.14 a barrel following a $1.46 slump to $81.27 a barrel on Wednesday. In contrast, Gold futures, which advanced marginally $1.30 to $2,161 an ounce in the previous session, are now soaring $45.90 to $2,206.90 an ounce.The U.S. dollar is currently trading at 151.29 yen, up slightly from 151.26 yen at the close of New York trading on Wednesday. In comparison to the euro, the dollar is now valued at $1.0904, having dropped slightly from yesterday's $1.0922.
Asian stocks saw significant growth on Thursday. This was due to investor optimism following indications from the Federal Reserve that potential interest rate cuts could occur in 2024. A weaker U.S. dollar also contributed to an increase in gold prices, which reached a new high of over $2,200 per ounce. Meanwhile, oil prices began to recover after dropping drastically in the U.S. trading session overnight.
China's Shanghai Composite Index ended slightly lower at 3,077.11, with issues surrounding slow growth and prevalent issues in the real estate market contributing to investor caution. Conversely, Hong Kong's Hang Seng Index rose by 1.9% to 16,863.10.
Japanese markets also experienced gains as traders returned from a holiday and data illustrated a continued growth in the country’s exports. This was largely due to increased demand in crucial markets. The Nikkei 225 Index increased by 2.0% to 40,815.66, setting a new record high, while the broader Topix Index rose by 1.6% to settle at 2,796.21.
In Korean markets, expert prediction of interest rate cuts from the Bank of Korea in July led to Seoul stocks making significant gains. The benchmark Kospi saw a 2.4% increase, reaching 2,754.86, its highest level since April 5, 2022.
Stocks in Australia rose sharply after data showed strong employment recovery in February, which resulted in an unexpected decrease in the unemployment rate. Consequently, the benchmark S&P ASX 200 Index increased by 1.1% to score a new high at 7,782.
Meanwhile, in Europe, stocks mostly rose as optimistic investors reacted to comments from the U.S. Fed that suggested it plans to cut interest rates three times in 2024. Despite this, there were variations in central bank approaches, with the Bank of England maintaining its benchmark rate, the Swiss National Bank decreasing its main interest rate, and the Norwegian central bank retaining its key interest rates, albeit with suggestions of future cuts.
While sector activity within the Eurozone manufacturing industry continues to decline, the services sector saw expansion in March. Major indices performance varied, with the U.K.'s FTSE 100 Index surging by 1.5% and the German DAX Index rising by 0.4%.
There were several noteworthy business highlights, including clothing retailer Next seeing a notable rise after reporting improved pre-tax profit, 3i Group announcing an 8% increase in net asset value, and miner Centamin reporting an annual production in line with guidance. The automobile sector also noted some positive news, as Volkswagen and Renault saw higher demand following the announcement of increasing new car sales in the EU.
Vossloh, a German company, has seen its shares rise following record sales and a significant increase in Earnings Before Interest and Taxes (EBIT) for the 2023 fiscal year. Conversely, United Internet has experienced a substantial downturn after revealing its annual results.
Turning to U.S. economic reports, the Labor Department's recent announcement showed an unexpected slight drop in first-time U.S. unemployment benefit claims for the week ending March 16th. The report noted that initial jobless claims slightly dropped to 210,000, falling by 2,000 from the previous week's revised level of 212,000. This decrease caught economists off guard who had predicted an increase to 215,000 from the previous week's original report of 209,000.
Additionally, the four-week moving average, a less volatile metric, increased slightly to 211,250, rising 2,500 from the previous week's revised average of 208,750.
The Federal Reserve Bank of Philadelphia also revealed a mild slowdown in regional manufacturing activity growth for March. The Philly Fed's diffusion index for current general activity slipped to 3.2 in March, down from 5.2 in February. Despite this diminution, any positive reading indicates growth, confounding economists' expectations for the index to drop to a negative 2.3.
The report also pointed out a rise in future activity indicators, indicating a broader expectation of overall growth in the coming six months.
At 10 am ET, the National Association of Realtors is set to release its February existing home sales report. It is anticipated that existing home sales will decline to an annual rate of 3.94 million in February, down from a surge to a rate of 4.00 million in January.
Simultaneously, the Conference Board is scheduled to issue its leading economic indicators report for February. The leading economic index is projected to fall by 0.3 percent, after a decrease of 0.4 percent in January.
At 11 am ET, the Treasury Department will announce the details of this month's two-year, five-year, and seven-year note auctions.
Lastly, Federal Reserve Vice Chair for Supervision Michael Barr will participate in "A View from the Fed: a Fireside Discussion at the Gerald R. Ford School of Public Policy" at 12 pm ET.
