US stock futures rallied Wednesday night as traders watched interest rates and the ongoing turmoil in Washington.
Dow Jones Industrial Average futures were up 46 points, or 0.1%. S&P 500 futures gained 0.2% and Nasdaq 100 futures advanced 0.1%.
Earlier in the day, the S&P 500 and Nasdaq Composite gained 0.2% and 0.4% respectively. The Dow, meanwhile, was closed.
Wednesday’s gains for the S&P 500 and Nasdaq came after Intel rallied close to 7% to drive technology stocks higher. They also tracked the cut in US interest rates from their highest levels since March 2020.
The benchmark yield on 10-year bonds fell to 1.09% per day from a record high of 1.18%. That interest rate cut came when two key Federal Reserve officials noted that monetary policy will remain easy for the foreseeable future.
The Fed Deputy Chairman said the central bank will not hike interest rates until inflation hits 2%. Meanwhile, James Bullard, the St. Louis Fed President, noted that there will come a time when policies need tightening, “but boy, I wouldn’t want a specific date for things right now.”
Rates have gone up this year in light of the prospect of increased US fiscal stimulus after Democrats win a majority in both the House and Senate. Inflation expectations have also been picking up recently.
“We think US inflation will be higher than most expect in the coming years,” wrote Adam Hoyes, assistant economist at Capital Economics. “At the same time, we think investors are overestimating how quickly the Fed will tighten monetary conditions. The Fed’s new flexible average inflation framework suggests that it will push inflation above 2% in the coming years.”
Investors are also watching Washington, as members of the House voted to impeach President Donald Trump for a second time – making him the first US president ever to be impeached twice – when a two-part majority accused him of instigating a riot in the Capitol last week.
Certainly, the market has largely averted growing political and civil unrest.
“Normally we expect risky assets to pull out at an event like this, but the market seems more focused on the next administration right now,” said Brian Price, head of asset management at the Commonwealth Financial Network. “
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