US open: Wall Street points higher after Fed Powell soothes the market

US stocks look to cautiously extend gains after Fed Powell insists the Fed is in no rush to tighten policy.

USA (2)

US futures

Dow futures +0.15% at 34000

S&P futures +0.08% at 4250

Nasdaq futures +0.03% at 14274

In Europe

FTSE +0.35% at 7124

Dax +0.2% at 15590

Euro Stoxx -0.41% at 4108

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Fed calms fears, S&P looks to fresh record highs

US stocks are edging higher on Wednesday, building on gains from the previous session following calming words from Fed Powell before Congress. Fed Chair Powell once again reassured the market that the spike in inflation is temporary and that the Fed was in no rush to tighten monetary policy. The soothing worlds were tonic to the markets which had been rattled by the Fed’s hawkish shift in monetary policy meeting.

Influential Fed John Williams followed also commented that any tightening in policy was still a long way off. Fed speakers putting a dovish twist on the projection of two rate hikes in 2023 has eased market fears, sending the US Dollar lower, whilst giving equity demand renewed energy. The Nasdaq surged to a new record high.

Fed speakers across the session will likely attract more attention than usual. The US PMI release is also expected to reflect a strong recovering economy.

Equities

The FANGs are on fire. Microsoft joins Apple in the $2 trillion club. The stocks has continued its pandemic rally on strong expectations for its booming cloud business. With workforces expected to continue with a heavy WFH focus, demand is expected to keep rising.

Where next for the S&P500?

After diving lower last week, briefly breaking through its 50 sma, the S&P 500 has completely recovered. The uptrend has resumed, the MACD appears to be forming as bullish crossover supporting further upside. A break above 4267 is needed for fresh all-time highs to be reached. It would take a move below 4190 the 50 sma to negate the near-term uptrend. A move below 4140 could see sellers gain momentum.  

FX – USD falls, GBP rises on strong PMI data

The US Dollar is edging lower, extending losses following Fed Powell’s reassuring words before Congress.

GBP/USD – the Pound is advancing, capitalizing on the weaker US Dollar and helped higher by strong PMI numbers. Manufacturing PMI came in ahead of forecasts at 64.2 in June. Services PMI cooled slightly from May to 61.7, just shy of forecasts. Delving deeper into the numbers , the data highlighted mounting inflationary pressures as input costs surged higher. CPI which is already above the BoE’s 2% target could push higher as a result.

GBP/USD  +0.17% at 1.3972

EUR/USD  -0.02% at 1.1940


Brent hits $75

Oil prices are climbing on Friday, with both benchmarks hovering around multi year highs and Brent hitting $75. Fuel demand is ramping up as pandemic curbs are lifted sand economies reopened. Surging demand is draining oil inventories.

API inventory data revealed a larger than forecast draw of 7.1 million barrels for the week ending June 18. This comes after an 8.5 million barrel draw in the previous week.

Attention will now start turning towards OPEC+ meeting next week. With the demand outlook improving, inventories falling and Iranian oil not yet close to be released back into the market, its likely that some countries will start supporting calls to raise production. For now, oil is comfortable at this price but OPEC could inject some volatility next week.

US crude trades +0.7% at $73.30

Brent trades +0.7% at $74.74

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Looking ahead

14:45 US Manufacturing & Services PMI

15:00 New Home Sales

15:30 EIA Crude Oil Inventories


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