Futures Gain on Powell, Earnings: Treasuries Rise: Markets Wrap

(Bloomberg) -- American stock-index futures extended gains and bonds rallied after Federal Reserve Chair Jerome Powell said the U.S. economic recovery still hasn’t progressed enough to begin scaling back stimulus.

The 10-year U.S. Treasury yield retreated below 1.4% and the dollar declined after the release of Powell’s comments before Congress later this morning. He added that inflation is likely to remain high in coming months before moderating.

“Powell is sticking to his guns that this is a transitory inflationary environment,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management. “He may not have the whole FOMC at his back in that outlook, but as he’s the leader of the Fed, that’s important and that’s what the markets are really keying in on.”

Contracts on the S&P 500 and Nasdaq 100 advanced, with Apple Inc. gaining in pre-market trading after the tech giant was said to have prepared suppliers for a boost in next-generation iPhone sales. Bank of America Corp. dropped in the pre-market trading after second-quarter earnings failed to impress investors, while Citigroup Inc. and Wells Fargo & Co. fared better.

The Stoxx Europe 600 index declined, led by utilities and travel and leisure companies. The pound gained and gilts fell after U.K. consumer prices accelerated more than analysts’ expectations in June.

The June U.S. inflation print on Tuesday topped all forecasts and pointed to higher costs associated with the reopening from the pandemic. Fed officials have said they expect such pressures to be transitory but some commentators see a risk of more durable increases that could force a quicker-than-expected reduction in stimulus.

“Strong GDP and earnings growth, supportive fiscal and monetary policy, and a recovering labor market all support an optimistic view on stocks for the remainder of the year,” said Greg Marcus, managing director at UBS Private Wealth Management. “The Federal Reserve will continue to walk a fine line between dovish commentary regarding the labor market, and hawkish comments surrounding asset purchase tapering.”

Global stocks remain close to a record and a range of other factors are influencing the outlook. They include the spread of the more contagious Covid-19 delta variant, the possibility of a peak in earnings and economic growth, and U.S. fiscal spending plans.

Oil hovered near a 2 1/2 year high after the United Arab Emirates has reached a preliminary deal to resolve the its standoff with OPEC+.

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Here are some events to watch this week:

• Bank of Korea monetary decision Thursday
• Bank of Japan interest rate decision Friday

These are some of the main moves in financial markets:

Stocks

• Futures on the S&P 500 rose 0.4% as of 8:49 a.m. New York time
• Futures on the Nasdaq 100 rose 0.7%
• Futures on the Dow Jones Industrial Average rose 0.3%
• The Stoxx Europe 600 was little changed
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.4%
• The euro rose 0.4% to $1.1818
• The British pound rose 0.5% to $1.3884
• The Japanese yen rose 0.3% to 110.25 per dollar

Bonds

• The yield on 10-year Treasuries declined four basis points to 1.37%
• Germany’s 10-year yield declined one basis point to -0.30%
• Britain’s 10-year yield advanced two basis points to 0.65%

Commodities

• West Texas Intermediate crude was little changed
• Gold futures rose 1% to $1,827.90 an ounce

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