Stocks Hit Record High After Fed Says Economy Is Strong Enough

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Principal Points

• Stocks hit a new all-time high in their fourth straight record-setting session
• Remarks from Fed Chairman Powell boost market sentiment as the bank prepares to taper

What’s Moving in the Markets?

The US stock market is on a tear. After a weak September, stocks on Wall Street have launched forward to reach new records even amid significant economic challenges.

On Wednesday, for the fourth consecutive day, major stock averages closed at record highs. In more detail, the S&P500, the tech-heavy Nasdaq and the Dow Jones rallied on continued optimism. That said, a speech by the Federal Reserve Chairman was the main driver for yesterday’s rally.

The Federal Reserve concluded its regular policy meeting with a press conference from Chairman Jerome Powell. With this in mind, traders and investors were prepared to hear comments on inflation, monetary support and overall economic outlook.

The Fed Begins Tapering by $15bn a Month

In particular, the key comments from Mr. Powell included increasing uncertainty around inflation expectations. On this note, the Chairman said inflation has been higher than expected and could stay high well into next year.

Still, the US central bank does not intend to tweak interest rates any time soon. However, Fed officials have agreed to wind down the vast monetary stimulus. In detail, starting November, the Fed will reduce, or taper, its $120bn in monthly bond-buying by $15bn a month.

As a result, the bank intends to have finished with the entire pandemic-driven stimulus program by June next year. To this end, Chairman Powell considers the economy is strong enough for the Fed to begin scaling back its asset purchases later this month.

Against this backdrop, market participants were unsurprised by the announcement as it had been telegraphed in previous speeches.

What to Watch in the Markets?

Presently, US stock futures hover relatively flat ahead of the opening bell on Thursday. Some individual stocks, however, might be in focus for investors.

Tesla stock, in particular, is once again among the best performers across the board. Shares of the electric-vehicle maker surged over 3.5% on Wednesday and closed at a fresh record of $1,213.

In cryptocurrency trading, the Ethereum token gained about 5% yesterday to reach a record high of $4,665. Early on Thursday, the second-biggest coin has retrenched a bit and is trading near $4,600. Bitcoin, on the other hand, is relatively stable, gravitating toward $62,500.

On Friday, the market will be watching the latest nonfarm payrolls data. In other words, the October jobs report will show the pace of labor-market recovery. The news will have a strong effect on the forex market, resulting in elevated volatility.

Economic Data Coming Up Today (EST times)

On Thursday, traders and investors shift their focus to the UK. At 08:00 am, the central bank of England will release its interest rate decision for November. It will be followed by a summary of the central bankers’ last meeting.

Later, at 08:30 am, the US will report its initial jobless claims. And at 09:00 am, European Central Bank President Christine Lagarde will deliver a speech.

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