Futures on US stock indices began trading on Wednesday in the black. Nasdaq jumped 1.5% in early trading on Wednesday, while Dow Jones futures rose 46 points or 0.15%. The broader S&P 500 has already gained about 1.0%.
Demand for risky assets is returning, as the "hysteria" about the increase in interest rates in the United States this year is gradually fading into the background and more and more investors are beginning to pay attention to fundamental indicators.
More recently, the president of the Federal Reserve System of Richmond, Thomas Barkin, said that in his experience, for those in the business community, an increase in interest rates would be a good indication of the stability of the economy. "Many would like us to return to a normal interest rate and normal functioning of the economy without stimulating support measures beyond the normal level," he said in a recent interview.
Talk that a more active reduction of the Fed's balance sheet may also reduce the number of necessary rate hikes this year is a good signal for the stock market, nervously experiencing these periods.
Barkin also noted that the US economy is ready to raise interest rates to curb inflation. With the Fed poised to start raising rates in March and later this year, Barkin said tight monetary policy is more appropriate now than a soft approach. However, he avoided answering how aggressive the central bank might be in the near future.
At the moment, futures indicate a high probability of a five-fold increase in the interest rate by 0.25% this year. According to CME calculations, the probability that the Fed can raise the rate six times is about one in three.
As for today's premarket, the shares of Alphabet, Google's parent company, have already risen by about 10.6% premarket after the company's quarterly results surpassed the top lines. Alphabet also announced a 20-to-1 stock split, indicating that the company may soon be included in the Dow Jones Industrial Average.
Shares of Advanced Micro Devices also rose 11.3% thanks to strong earnings, while shares of Starbucks fell 3.3% on the results. PayPal sank by 17% in a few hours after the publication of a disappointing forecast.
General Motors shares rose 1.3% in premarket trading after the automaker reported earnings that beat all estimates. The company also raised its forecast for 2022, although revenue was less significant than expected.
Data on the labor market is coming out today. Economists expect that the number of private-sector employees from ADP increased by 200,000 in January, after an increase of 807,000 in December 2021. However, many economists warn that wage data for January may disappoint due to problems related to the Omicron coronavirus strain.
As for yesterday's close, the S&P 500 rose for the third day in a row and gained 0.7%. The Dow increased by more than 270 points, helped by the growth of Boeing shares by 4.1%. Nasdaq Composite rose by 0.75%.
The reporting season will continue today with key data from Meta Platforms (formerly Facebook), and Qualcomm. AbbVie, DR Horton, and T-Mobile will publish data for the 4th quarter.
As for the technical picture of the S&P 500
The market has recovered strongly recently and it is expected that volatility will gradually decrease and the situation will stabilize. Most likely, we will see another drawdown today to $ 4,536, which will lead to an increase in demand and attempts by buyers of the index to reach $ 4,598. A break in this range will open a direct road to $ 4,665 and $ 4,722. If there is no one below $ 4,536, the pressure can return very quickly.
