Wednesday, 23 January, 2019

Pacific Stocks Rise After Wall Street Snaps Winning Streak

By Swati Pandey By Swati Pandey
Nellie Chapman | 24 February, 2018, 08:46

As of Thursday's close, the Dow and S&P 500 were each facing a loss of less than 1% for the week, while the Nasdaq Composite was on track to gain 0.2%, despite its lengthy skid in negative territory.

Congressional testimony by new Federal Reserve Chairman Jerome Powell is also likely to attract next Wednesday amid lingering concerns about the outlook for interest rates. But other comments that wage growth remains "moderate" could be cited to support the view that the Fed was sticking with its December projection for three rate hikes, he noted.

The Fed now forecasts three rate rises this year and investors have all but priced in a nudge upwards in the benchmark lending rate at the central bank's next meeting in March. On the Nasdaq, 2,027 issues rose and 809 fell.

But an actual read of the minutes shows growing confidence in the path of economic growth and inflation - setting the stage for a potential acceleration in the pace of the Fed's tightening campaign. The Fed seeks to manage interest rates to promote maximum employment and stable prices, which it defines as inflation rising at an annual rate of 2 percent.

"This will be one of the more hawkish Feds we have experienced in 20 years", said Andrew Brenner, head of worldwide fixed income at NatAlliance Securities LLC, a broker-dealer, in a note on Wednesday.

Over time Powell's speeches have come to emphasize how the long spell of loose USA monetary policy has given the labor market time to recover, allowing the unemployment rate to fall from a high of 10 percent in 2009 to a 17-year low of 4.1 percent in January this year.

Doug Cote, chief market strategist at Voya Investment Management, said strong corporate earnings, healthy readings of manufacturing justify an upbeat outlook for stocks and bond yields rising off ultralow levels. "There is no way the economy can be growing at 3%, as it is now, without the 10 year yield also going up but this is like a high-quality problem", Cote said. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.6 basis points to 2.871 percent. A "hawkish" monetary policymaker is more aggressive in warding off inflation.

Soaring shares of Hewlett Packard Enterprise and HP Inc, the two companies created from the split of Hewlett Packard Co in 2015, were a major force behind the surge in technology stocks. William Dudley, president of the New York Fed, told the conference that, to be sure, the ability to again purchase bonds if and when rates hit zero "seems like a good tool to have".

Blue Buffalo Pet Products jumped 17 percent after General Mills said it would buy the natural pet food maker for $8 billion in cash.

Rosengren, one of only a few sitting policymakers who also served during the last downturn, said the expanding US deficits could further erode the government's ability to help curb any future recession. The company's shares were down 0.5%.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday.