The S&P 500 returned to record highs on Thursday as global stocks surged in response to the Federal Reserve’s plan to accelerate the completion of economic stimulus as growth accelerates.
As of 05:30 a.m. ET, Dow Jones futures increased by 0.48%, S&P 500 futures increased by 0.56%, and Nasdaq 100 futures increased by 0.64%, suggesting a robust start to trading later.
A strong later trading start was indicated by the Dow Jones futures’ 0.48% gain, S&P 500 futures’ 0.56% gain, and Nasdaq 100 futures’ 0.64% gain as of 05:30 a.m. ET.
“Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation. US Risks to the economic outlook remain, including from new variants of the virus,” The Fed said in a statement on Wednesday.
The Federal Open Market Committee stated that it anticipates inflation to stay above 2% “for some time” but supported hiking interest rates in 2022 more quickly than first anticipated in order to stop it from rising further. In addition, the central bank said that it would hike interest rates three times in the upcoming year and double the rate of tapering to $30 billion per month.
According to economists Allison Boxer and Tiffany Wilding of fixed-income fund manager PIMCO, “the Fed has so far skillfully navigated the adjustment in market expectations for the path of policy without materially tightening financial conditions.”
The Fed’s announcement that economies might recover from the pandemic after all, despite the growing threat from the Omicron variety, was well received by international markets.
Stocks in US increased, with Tokyo’s Nikkei 225 rising 2.13%, Hong Kong’s Hang Seng up 0.23%, and the Shanghai Composite up 0.75%.
“With the Fed meeting now in the rear-view mirror, all attention now turns to today’s Bank of England and European Central Bank decisions, where the inflation problem is just as real, especially for the Bank of England after yesterday’s big jump in headline consumer price index in November.”
The course that policymakers at the Bank of England may take is rather less certain. Despite rising inflation last month, they refrained from hiking UK rates. With the proliferation of the Omicron version, which has already led the government to impose mask-wearing regulations, they now have to balance the competing forces of a tight job market and rising inflation.
“Continuous increases in employment and economic activity, together with a decrease in inflation, are anticipated to be supported by advancements in vaccinations and a relaxation of supply constraints. There are still threats to the economic outlook, particularly from novel virus strains, the Fed stated in a statement on Wednesday.
The Federal Open Market Committee favored raising interest rates in 2022 at a faster pace than was initially expected to prevent inflation increasing further, though it said it expects it to remain above 2% “for some time”. The central bank also said it would double the rate of tapering to $30 billion a month and suggested it could raise interest rates three times next year.
“In our view, the Fed so far has masterfully navigated the adjustment in market expectations for the path of policy without materially tightening financial conditions,” Allison Boxer and Tiffany Wilding, economists at fixed-income fund manager PIMCO said.
Global markets responded positively to the Fed’s decision that suggested economies could recover from the pandemic after all despite the rising threat from the Omicron variant.
Elsewhere, the dollar index fell 0.31% to $96.20. Gold gained in line with the weakness in the US currency, rising above $1.786 an ounce.