Dow Soars to Record on Recovery Hopes/Powell’s Comments

Equities

Major US stock index futures raced higher yesterday amid growing hopes over the economic recovery as the Coronavirus cases continued to drop in the United States, and the Federal Reserve Chairman assured the current policy stance. The New Covid19 cases in the United States was trending down significantly since mid-January, and the vaccination program is going well with delivering more than 65 million doses. On the other hand, during his semi-annual monetary policy testimony, the Federal Reserve Chairman Jerome Powell reiterated the Fed's commitments towards achieving a proper and solid economic recovery. He repeated that there is so much work to be done to improve the labor market, as the real unemployment rate is still far away from pre-covid levels. Meanwhile, he calmed investors' excitement over inflation spikes, stating that it is still far from the target. Investors seemed more interested in cyclical stocks and small-caps. The Dow Jones Industrial Average futures rose to an all-time high of 32031, with Boeing and Chevron gaining significantly. Russell 2000 recovered to 2284, the S&P500 rebounded to 3933, and Nasdaq futures hovered near 13300. The continuous rise in US Treasury yields should be closely monitored as it remains a threat to overvalued stocks.

USD

The dollar index which measures the greenback against a basket of major currencies drifted lower to 89.93, the lowest since early January as Powell affirmed the Fed's current policy stance. As per Powell, the unemployment rate is still elevated significantly, where the Fed will continue with the current pace of asset purchases to reach targets. Also, he considered inflation is away from the levels that could trigger action from the Fed, and expressed that the Fed has the needed tools to act on inflation. The commodity currencies outperformed with AUDUSD rising to $0.7992, the highest since February 2018, and the USDCAD tumbled to 1.2494.

Metals

Precious metals prices declined as Treasury yields extended upside rally. The US 10-year yields rose to 1.43%, the highest in a year. The price of a gold ounce declined to $1783, the price of a silver ounce fell to $27.77, palladium futures eased to $2420, and platinum surrendered partial gains to $1255.

Oil

Oil prices extended their upside rally as investors stick to the reflation trade. The falling coronavirus cases around the world, suggest a softer medium of restrictions and a faster return to normalization, which would positively impact oil demand levels. On the other hand, there is some chatter that the Kingdom of Saudi Arabia could ease gradually its voluntary cuts, which would keep the market supported. Prices ignored the inventories report that showed a buildup of 1.285 million barrels. The West Texas Intermediate crude April delivery rose to $63.74, and the Brent blend May contract rallied to $66.77.

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