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U.S. Stock Futures Rise Ahead of Fed Minutes

Ever since late 2016, the stock market has been under the impression that the economy would only grow with faster interest rates and slower rates of inflation. At around the same time, given the campaigns from the President Elect Donald Trump, investors had bet on the market with considerations of fiscal changes to the economy; these included tax cuts, easier regulations in the financial industry, and infrastructure spending. The expectation that Trump would bring forth these changes led to a surge in the U.S Stocks over the past two months. Today, with about two weeks left before Trump takes the presidential office, investors are holding their breath for the polished details of his proposed policies.

As investors eagerly waited for the Federal Reserve to release minutes from their December meeting, U.S. stock futures rose higher. In this meeting, the Fed had resolved to raise interest rates for the second time in about ten years. The Central Bank had also made the decision to hike rates by 25 basis points. This moved the Fed funds rates from 0.5% to 0.75%. Besides this, the Fed raised the previously made forecasts to indicate that there will be three likely rate hikes in 2017. This is one more from the two hikes that had been previously announced. Between 2018 and 2019, the rate hikes will remain three.

In only the second day of trading in this brand new year, slightly ahead of the release of the minutes from the Fed’s meeting held in December, U.S Stocks showed modest gains. As it strived to hit its 20,000 mark, the Dow Jones Industrial Average was held high by Nike (NKE) and Boeing (BA). The Nasdaq was number one with a while 0.4% gain. The S&P closely followed behind with a 0.3% gain while the Dow was the last with only a 0.1% gain. In the past few weeks, the Dow Jones Industrial Average came close to hitting the elusive 20,000 mark. On Tuesday, this blue-chip index closed at 19,881.76. With optimistic data from major U.S. automakers, the Dow is likely to hit its mark soon.

Technology stocks also recorded increases, a move that greatly helped in offsetting oil prices. On Tuesday, oil had hit an 18-month high, but given the high strength of the dollar, oil quickly reversed this rally. On Wednesday, the oil stocks were marginally up at $55.67. But just a day after the dollar index had risen to a 14-year high, it fell by 0.20 percent due to profit-taking.

Other shares like Tesla and Depomed performed quite differently. While the former dell by a whole 1.9 percent down to $212.88 in premarket trading, the drug making company, Depomed, rose by a huge 12.5 percent to $22.89. This rise is attributed to the fact that KKR & Co still has an interest in purchasing Depomed. Ford and General Motors both rose by more than 3 percent in rapid trade. These sales turned out better that expected. Shake Shack rose by 5 percent in quick trade as its shares quickly approached a $39.61 trade point. Comcast rose by 1.19 percent on account of Macquarie raising its price target. Gilead Sciences, after getting a new oncology chief, rose by 2.99 percent.

Stocks in retail, auto making and leisure clearly soared ahead of the Fed minute releases. Stocks in medical equipment were not hit by the same luck; they lagged behind. As traders opened the new trading year, they were optimistic that U.S stocks will continue to record increases. The same goes for online trading companies like CMC Markets. Low interest rates were especially kind to the S&P 500 index as it rose by over 200 percent since the financial crisis in 2008. The index had rallied over 6 percent since Trump won the White House bid back in November. The index rose by 1.33 percent in the consumer sector on account of the gains in the automakers. Among the 11 S&P 500 sectors, nine of ten recorded highs. Only two, telecommunications and energy, recorded decreases. The S&P 500, as well as other U.S. futures, continue to rise, but with the expected hike in interest rates by both the Fed and the Central bank, investors fear that further increases might be crippled.

 

Filed in: The Market

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