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  • It was a bullish day for US equity markets, with the S&P 500 at one point crossing above the 4100 mark.  
  • Fed Chair Powell spoke on Thursday at an IMF panel and stuck to the usual dovish script, though did signal concerns about rising COvid-19 cases.  

It was a bullish day for US equity markets, with the S&P 500 at one point crossing above the 4100 mark (a record intra-day high) before closing at 4097, up 0.4% on the day. The gains were driven primarily by large-cap tech stocks, with the S&P 500’s largest component Apple gaining 1.9%. Tech stocks have been performing well amid an ongoing pullback in long-term US government borrowing costs (10-year yields dropped another 3bps on Thursday to 1.62%, down 13bps since the start of the month); the FANG+ index gained 1.4% for its ninth consecutive day of gains, helping the tech-heavy Nasdaq 100 index to a 1.0% gain.

But positivity was also being seen outside of tech; the Dow gained 0.2% and the Russell 2000 0.9%, while the CBOE volatility index dropped to fresh post-pandemic lows under 17.00. The only weak points were energy stocks, which dropped 1.4% despite slightly higher crude oil prices, and real estate, which dropped despite a fall in yields which would typically be associated with a fall in mortgage costs that ought to help the housing sector.

Driving the day

Fed Chair Jerome Powell was on the wires on Thursday, speaking at an IMF panel, and his commentary was as dovish as market participants have come to expect; he noted that the US economic outlook had improved recently, but that rising Covid-19 cases abroad and in the US pose a threat to the near-term economic outlook, which depends heavily on the path of the pandemic. He was pleased by the recent labour market report, but said that a string of further monthly job gains like this would be needed to bring the US economy back in line with the Fed’s goals, which it remains a long way from, meaning highly accommodative monetary policy conditions remain necessary. Powell emphasised one of the key points of Wednesday’s minutes, that is that the Fed wants to see actual progress towards its goals before tightening, rather than tightening based on bullish forecasts. On inflation, he again played down the prospects that the coming increase in inflation will be persistent, though he did remind markets that the Fed does have the tools to deal with inflation that gets too high. Other Fed speakers mostly stuck to the above script.  

In terms of other themes worth nothing, Thursday saw a soft weekly jobless claims report. Initial Jobless Claims came in at 744k, higher than  expectations for 680k and up from the previous figure which was revised up 9K  to 728K. Meanwhile, Continued Claims also declined less than expected but did see a slight improvement on the prior month. Some desks attributed the disappointing jobless claims data as putting downwards pressure on yields and actually helping stocks. Elsewhere, market participants are also monitoring the geopolitical landscape, with the US reportedly mulling sending warships to the Black Sea to signal to Russia that it is closely monitoring the situation in Eastern Ukraine and there was tough talk from Russian officials about the need to protect its citizens in Eastern Ukraine region. Meanwhile, US officials are attempting to play down expectations for a breakthrough in talks with Iran, though talks are being hailed as a step in the right direction and set to continue in Vienna in the coming days.  

Looking ahead, Producer Price Inflation data for the month of March on Friday will be watch watching, but equity market attention is seemingly already turning to key events next week in the form of March Consumer Price Inflation and Retail Sales, more Fed speak from Fed Chair Jerome Powell and Vice Chair Richard Clarida, as well as bank earnings signaling the start of the new earnings season.