Stocks Poised to Extend Gains on Fed Boost
January 31 2019 - 8:31AM
Dow Jones News
By David Hodari
U.S. stocks were set for small opening gains on Thursday after
the Federal Reserve signaled interest rate-increases were on hold,
boosting major indexes to levels not seen since early December.
Futures put the S&P 500 on course to edge 0.1% higher at the
open, and the Nasdaq-100 was set to advance 0.5%. The
technology-heavy index has outperformed the S&P in January,
benefiting from individual tech companies' strong earnings.
While Microsoft was down 2% in premarket trade after its
post-close release Wednesday, Qualcomm was set to gain by the same
amount after its own report. Facebook shares surged 11% in
premarket trading after posting a record quarterly profit.
In other sectors, energy giant ConocoPhillips was up 1.5% and
General Electric was up 7.5% in premarket trade after both
companies impressed investors with their own earnings reports.
Low expectations this earnings season have allowed equities to
recoup most of their losses from December, the worst month for the
S&P 500 in 87 years.
"Our worst fears have not been realized and the commentary is
that results are good enough. People were worried about whether
this was the start of a continuous decline," said Patrick Kaser,
managing director and portfolio manager at Brandywine Global.
For all sectors, including tech, "the first half of the year is
as bad as it'll get and people are forecasting a recovery in the
second half," Mr. Kaser said.
Although U.S. stocks had rallied earlier Wednesday, they
extended their gains after the Federal Reserve announced its
decision to leave interest rates unchanged. The Dow Jones
Industrial Average closed at a high last seen on Dec. 4.
While concerns about the health of global economic growth and
what some investors saw as overly aggressive monetary policy roiled
markets at the end of 2018, Chairman Jerome Powell's comment
Wednesday that "the case for raising rates has weakened somewhat,"
buoyed indexes around the world.
Mr. Powell didn't say whether the Fed's next rate move was more
likely to be an increase or a cut, and reiterated that future
decisions would "depend entirely on the data." The decision put
nonfarm jobs figures, due out Friday, in particularly sharp
focus.
Equities' midweek rally came after the Fed appeared to have
"suspended its withdrawal of liquidity and that's a big driver for
markets," said Frances Hudson, a global strategist at Aberdeen
Standard Investments. "More money in the system has a big impact
and it's probably the issue that normally brings an economic or
business cycle to a close, but it doesn't have to end with a
recession."
The yield on 10-year U.S. Treasurys was last 2.666%, down from
2.694% late Wednesday. Yields and prices move in opposite
directions. The WSJ Dollar Index was last down 0.2%, extending its
five-day fall to 1.2%.
The Stoxx Europe 600 was flat in early afternoon trading. While
its energy constituents rose 1.7% -- Royal Dutch Shell shares
climbed 3.8% after the company released earnings and announced
further share buybacks, and consumer-goods company Unilever's
shares dropped 2.9% following its earnings report. The poor showing
combined with weak eurozone gross domestic product figures to sap
the region's index of most of its early-day gains.
The yield on 10-year German government bonds dropped to 0.122%
from 0.134% late Wednesday, after a weak reading on the country's
retail sales.
In Asia, Hong Kong's Hang Seng rose 1.1% to hit a four-month
high, with the index's tech constituents among its sharpest
climbers after many corporate earnings for that sector.
The yuan increased 0.2% against the dollar, remaining close to a
six-month high, as investors absorbed better-than-expected
purchasing managers index figures and waited for the second day of
high-level trade talks between Beijing and Washington -- though
some investors had low expectations.
"I'll be surprised if there's anything interesting that comes
out of those meetings. It'll be hard to get anything done in 48
hours, but both sides will want to announce progress," said Craig
Birk, chief investment officer at Personal Capital.
Japan's Nikkei advanced 1.1%, with the yen up 0.4% against the
dollar, after industrial production numbers beat market
expectations. The data outweighed remarks from the Bank of Japan,
in which some board members expressed growing concerns about global
growth.
In commodities, New York gold prices were up 1% at $1,323 a troy
ounce, hitting fresh 8 1/2 -month highs, on the weaker dollar.
Write to David Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
January 31, 2019 08:16 ET (13:16 GMT)
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