Stock Rally Pauses after Powell’s Remarks, Dollar Declines

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Principal Points

• Global stocks halt their move higher on Thursday
• US dollar remains near weekly lows

The global rally in equities came to a halt yesterday and US futures keep steady ahead of the opening on Thursday. The US dollar remains offered, following Fed Chair Jerome Powell’s dovish comments while gold and silver erase some gains.

On Wednesday the trading session failed to bring anything new and exciting to the market and traders and investors produced rather weak volumes but just enough to uphold the markets near record highs. European session ended trading to the downside for a second consecutive day. While initially major indexes, DAX, CAC40, and the FTSE100, posted gains near 1.00% straight out of the gate, the buying momentum later faded and all closed in the red. The German DAX recorded a loss of 0.56%, while the French CAC40 slid 0.36% followed by the UK’s FTSE100, down 0.11%.

As the session transitioned to the other side of the Atlantic, the S&P500 fluctuated virtually flat throughout the day and ended the session down by 0.03%, or 1.35 points. The Dow Jones Industrial Average posted gains of 0.20%, while the Nasdaq Composite dropped 0.25%. Futures contracts remain steady right above yesterday’s levels and indicate small-sized gains at the opening.

The US dollar keeps steady near its weekly lows across currencies. The EURUSD is hovering near weekly highs above 1.2100 as traders kept the pair well bid following Fed’s comments on the economy yesterday. Fed Chair Jerome Powell, speaking to the Economic Club of New York, reaffirmed that the economy is still “very far from a strong labor market” despite the “surprising speed of recovery early on”.

Fed Reserve Chairman Makes Far-Reaching Appeal

In his remarks, Mr. Powell indicated the importance of “patiently accommodative” monetary policy in an economy that continues to falter while the additional stimulus package poses risks of rising inflation. On the topic of inflation fears, Chairman Powell presented a rather calm approach, showing no anxiety. In his words, “inflation dynamics will evolve but it’s hard to make the case they would evolve very suddenly in this current situation”. Mr. Powell also added that there is “strong spending growth, and there could be some overt pressure on prices”.

The Fed Chairman also addressed the US unemployment numbers. He noted that there are 10 million people less working in the economy now compared to February 2020 levels and he urged policymakers to work together to close that gap. Mr. Powell also supported the negotiations in Congress over the fiscal stimulus and said the discussions are “appropriate”. “Workers and households who struggle to find their place in the post-pandemic economy are likely to need continued support,” he said. Additionally, he made a broader appeal to fiscal authorities, central bankers, businesses, and government to join efforts to revitalize the post-pandemic jobs market.

“Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and sustaining maximum employment will require more than supportive monetary policy.”