Written By The world of finance is always full of surprises, and the recent turn of events in US stock futures has left many investors puzzled. Despite Federal Reserve Chairman Jerome Powell’s warning on interest rates, the market seems to be soaring higher than ever before. So what’s behind this unexpected surge? In this blog post, we’ll explore some possible reasons why US stock futures are defying expectations and offer insights into what could be driving this bullish trend. Get ready for a wild ride!
US stock futures surge after Powell’s remarks on interest rates
U.S. stock futures surged on Thursday following Federal Reserve Chairman Jerome Powell’s remarks on interest rates.
Powell said the central bank is “closely monitoring” the economy and is prepared to “act as appropriate” to sustain the expansion. His comments came after the Fed raised interest rates for the third time this year and signaled that it expects to do so again in 2019.
The remarks reassured investors who were worried that the Fed might raise rates too quickly and derail the economy. The Dow Jones Industrial Average rose more than 300 points in early trading, while the S&P 500 and Nasdaq Composite also gained ground.
Powell says rates will remain low for the foreseeable future
Powell says rates will remain low for the foreseeable future:
In a speech on Thursday, U.S. Federal Reserve Chair Jerome Powell said that interest rates are likely to remain low for the foreseeable future, even as the economy continues to recover from the Covid-19 pandemic.
Powell’s remarks come as stock futures soared in early trading on Thursday, with the Dow Jones Industrial Average and S&P 500 both up more than 1%. The Nasdaq Composite was also up nearly 1%.
Investors appeared to be shrugging off Powell’s warning that rates could rise sooner than expected if the economic recovery accelerates. Powell said that the Fed is still committed to supporting the economy and keeping rates low until it has “weathered this storm.”
The Fed chair’s comments come as policymakers are split on when to start raising rates. Some members of the Fed’s rate-setting committee have argued that rates should be increased sooner rather than later, while others have cautioned against moving too quickly.
At its meeting last month, the Fed decided to keep interest rates unchanged at near-zero levels and signaled that it expects to keep them there through 2023.
Stocks rally on hopes of more stimulus measures
As Federal Reserve Chairman Jerome Powell sounded a cautious tone on interest rates, U.S. stock futures surged on Friday amid renewed hopes for more economic stimulus measures.
Powell’s remarks came as investors have been worried that the Fed might start to wind down its asset purchase program and raise interest rates sooner than expected. However, Powell said that the central bank is not “thinking about raising rates” at its upcoming meeting in June and signaled that it could provide more support to the economy if needed.
The comments from Powell helped to ease some of those worries and sent stock futures sharply higher in pre-market trading. Futures for the Dow Jones Industrial Average rallied nearly 400 points, or 1.4%, while those for the S&P 500 soared 1.6%. Nasdaq Composite futures climbed 2%.
Worries about inflationary pressure continue to weigh on markets
Inflation has been a worry for investors since the start of the year, when the Fed raised interest rates and signaled more hikes to come. The central bank’s actions have made it more expensive for companies to borrow money, which in turn has led to higher prices for consumers.
The stock market has been volatile in recent weeks as investors grapple with the possibility of inflationary pressure. Powell’s comments on Thursday did little to assuage those concerns, and US stock futures were down in early trading on Friday.
Conclusion
Despite Jerome Powell’s warning on interest rates, US stock futures have remained incredibly resilient and even surged in recent months. This can be attributed to a variety of factors, including the Fed’s commitment to keep interest rates at historic lows and the expectation of further stimulus packages. Investors are also confident that companies will remain profitable despite economic uncertainty due to their cost-saving measures, as well as their increased focus on digital transformation initiatives. All these factors point towards an optimistic outlook for US stock market performance going forward.
