Top News  Shutterstock The Fed's optimistic, but are investors? On Wednesday, the central bank sharply upgraded its 2021 GDP growth forecast to 6.5%, the largest annual output since 1984, and also said it expected unemployment to drop. Fed Chair Jerome Powell added that inflation was forecast to reach 2.4% this year, but called it a temporary surge. The biggest news was a pledge not to raise interest rates until 2024 and the continuation of an asset purchase program in which the central bank buys at least $120B of bonds per month.
Some are wondering if the Fed is so confident in the outlook, why not raise rates sooner? The Fed's new framework that it rolled out last August wants to let inflation run consistently above its 2% target, as well as keeping rates steady until it sees maximum employment. The central bank may also want to view that "surge in activity" as durable, before proceeding to tighten monetary policy.
Cue the inflation concerns: Stocks staged an afternoon rally on Wednesday following the news, including the beaten-down tech sector, but mellowed in overnight trading as Treasury yields soared. At the time of writing, the yield on the 10-year Treasury was up 10 bps to 1.74%, while futures linked to the Nasdaq were off 1.3%, continuing a rotation from growth stocks to value. Inflation concerns continue to rattle investors as the yield curve steepens, with some concerned by the fact that Powell was quick to dismiss inflation as being short-term in nature. "Powell and the Fed did a pretty good job of navigating an uncertain market and delivered just enough to make sure equity volatility didn't rise, but that said, it hasn't put a cap on yields," said Edward Park, chief investment officer at Brooks Macdonald.
Policy around the globe: Even as the U.K. economic outlook brightens, the Bank of England will likely emphasize its high bar for tightening monetary policy in its decision today, matching a message from the Fed Chair Jay Powell. Meanwhile, reports suggest the Bank of Japan will agree to allow yields to trade in a wider band when it ends a two-day policy meeting on Friday.
   | | Top News Shutterstock The Fed's optimistic, but are investors? On Wednesday, the central bank sharply upgraded its 2021 GDP growth forecast to 6.5%, the largest annual output since 1984, and also said it expected unemployment to drop. Fed Chair Jerome Powell added that inflation was forecast to reach 2.4% this year, but called it a temporary surge. The biggest news was a pledge not to raise interest rates until 2024 and the continuation of an asset purchase program in which the central bank buys at least $120B of bonds per month.
Some are wondering if the Fed is so confident in the outlook, why not raise rates sooner? The Fed's new framework that it rolled out last August wants to let inflation run consistently above its 2% target, as well as keeping rates steady until it sees maximum employment. The central bank may also want to view that "surge in activity" as durable, before proceeding to tighten monetary policy.
Cue the inflation concerns: Stocks staged an afternoon rally on Wednesday following the news, including the beaten-down tech sector, but mellowed in overnight trading as Treasury yields soared. At the time of writing, the yield on the 10-year Treasury was up 10 bps to 1.74%, while futures linked to the Nasdaq were off 1.3%, continuing a rotation from growth stocks to value. Inflation concerns continue to rattle investors as the yield curve steepens, with some concerned by the fact that Powell was quick to dismiss inflation as being short-term in nature. "Powell and the Fed did a pretty good job of navigating an uncertain market and delivered just enough to make sure equity volatility didn't rise, but that said, it hasn't put a cap on yields," said Edward Park, chief investment officer at Brooks Macdonald.
Policy around the globe: Even as the U.K. economic outlook brightens, the Bank of England will likely emphasize its high bar for tightening monetary policy in its decision today, matching a message from the Fed Chair Jay Powell. Meanwhile, reports suggest the Bank of Japan will agree to allow yields to trade in a wider band when it ends a two-day policy meeting on Friday.
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| Economy Many entertainment venues that were shut down more than a year are starting to show signs of life as companies continue to make reopening announcements. The theme can be clearly seen in financial markets, where the cyclical trade has been on fire. The Dow Jones Industrial Average (NYSEARCA:DIA) closed at a record 33,015.37 on Wednesday, just five trading days after clearing the 32,000 milestone (get out your "Dow 33K" caps).
The latest? Disneyland (DIS) in Anaheim, California will reopen April 30, with the parks operating at around 15% capacity to start. "I think as people become vaccinated, they become a little bit more confident in the fact that they can travel, and, you know, stay Covid-free," CEO Bob Chapek told CNBC. "Consumers trust Disney to do the right thing, and we've certainly proven that we can [open] responsibly, whether it's temperature checks, masks, social distancing, [or] improved hygiene around the parks."
That's not all. AMC Entertainment (NYSE:AMC) anticipates that 98% of its U.S. circuit will be open by Friday following the theater chain's toughest year in history. AMC repeatedly came close to filing for Chapter 11 in 2020 and saw most new films delayed because of the coronavirus pandemic. Reopened theaters will still have capacity restrictions to allow movie goers to social-distance and will "operate with the highest devotion to the health and safety." AMC +4% premarket.
Outlook: Corporations are not the only ones experiencing a windfall from a broader vaccine rollout and declining COVID caseloads. More than half of U.S. small businesses are fully reopened as many local restrictions were lifted, according to a report from Kabbage, a fintech owned by American Express (AXP). Will pre-pandemic commercial occupancy rates return? 33% of surveyed businesses said they would expand digital operations to supplement or replace in-person operations, while only 15% would scale back digital operations to pre-pandemic levels. (4 comments) |
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