9.35am: Investor optimism fuelled by dovish Fed official commentary
US stocks kicked off the final day of the trading week higher as investors digested commentary from Federal Reserve policymakers ahead of the release of February’s ISM non-manufacturing purchasing managers index (PMI).
Just after the market opened, the Dow Jones Industrial Average had added 73 points or 0.2% at 33,077 points, the S&P 500 was up 15 points or 0.4% at 3,997 points, and the Nasdaq Composite had gained 57 points or 0.5% at 11,521 points.
FOREX.com market analyst Fiona Cincotta noted that the USD was falling after investors focused on the more dovish comments from Fed President Bostic, who suggested that the tightening cycle could be paused by the summer.
“More US Federal Reserve speakers are also set to hit the airwaves at various times across the session. These include Dallas Fed President Lori Logan and Richmond Fed President Ton Barkin, among others,” she said.
“ISM services data and Fed speakers will drive trade.”
Cincotta added that should the ISM service PMI for February show a larger-than-forecast decline, this could calm hawkish Fed bets and support stocks.
6:30am: ISM Services PMI in focus
Wall Street is expected to end the week on a positive note after stocks staged a recovery Thursday on hopes the US Federal Reserve will soon hit pause on interest rate hikes, with the release of February’s ISM Services purchasing managers index (PMI) eyed on Friday.
Futures for the Dow Jones Industrial Average (DJIA) rose 0.2% in Friday pre-market trading, while those for the broader S&P 500 index gained 0.3%, and contracts for the Nasdaq-100 added 0.4%.
After a mixed session on Thursday, stocks rebounded in afternoon trading and the 10-year Treasury yield retreated to around 4.02% after hitting 4.1%. The DJIA closed 1.1% up at 33,004, the S&P 500 rose 0.8% to 3,981 and the Nasdaq Composite finished at 11,463 for a 0.7% gain.
“Dovish? Atlanta Federal Reserve President Raphael Bostic said he favours a ‘slow and steady’ approach to hikes, calling for a hike of 25 basis points later this month,” commented Neil Wilson, chief market analyst at Markets.com. “This seemed to placate markets somewhat after being on a relentless ‘higher for longer’ train for the last few days.
“Governor (Christopher) Waller was more direct saying that ‘if those data reports continue to come in too hot, the policy target range will have to be raised this year even more to ensure that we do not lose the momentum that was in place before the data for January were released’. My view is to focus on Waller more than Bostic,” Wilson added.
With investors awaiting the February ISM services survey release later today, TickMill Group market analyst Patrick Munnelly noted that market watchers anticipate the headline PMI readiing will remain anchored in expansionary territory above the 50-point level.
“The January increase to 55.2 surprised to the upside, however, the uptick was widely attributed to milder weather leading to an increase in activity. The prices index remained buoyant despite retreating from elevated levels over the past 12 months,” Munnelly noted.