By Modupe Gbadeyanka
Barely 24 hours after the monetary policy announcement by the Federal Reserve, the major US index futures are pointing to a higher opening on Thursday, with stocks likely to see further upside after moving notably higher over the course of the previous session.
Stocks may continue to benefit from a positive reaction to the decision by the Fed to raise rates by a quarter point as widely expected.
The central bank’s projections called for only two more rate hikes this year. The unchanged outlook for rate hikes this year offset concerns that the Fed intends to accelerate the pace of rate increases.
Following the Federal Reserve’s widely expected decision to raise interest rates, stocks moved notably higher over the course of the trading day on Wednesday. The strength on the day offset much of the weakness seen in recent sessions.
The major averages ended the day firmly in positive territory but off their highs of the session. The Dow rose 112.73 points or 0.5 percent to 20,950.10, the Nasdaq climbed 43.23 points or 0.7 percent to 5,900.05 and the S&P 500 advanced 19.81 points or 0.8 percent to 2,385.26.
The strong upward move by stocks came after the Fed announced its decision to raise the target range for the federal funds rate by 25 basis points to 0.75 to 1 percent.
A statement from the Fed said the decision to raise rates came in light of realized and expected labour market conditions and inflation.
The Fed said data received since its previous meeting in February indicates that the labour market has continued to strengthen and that economic activity has continued to expand at a moderate pace.
Looking ahead, members of the Fed project two more rate hikes this year, which would bring the target range for the federal funds rate to 1.25 to 1.50 percent. The median estimate is unchanged from last December.
The Fed reiterated that it expects economic conditions will evolve in a manner that will warrant gradual increases in interest rates.
Minneapolis Fed President Neel Kashkari was the lone member to vote against the rate hike, preferring to leave rates unchanged.
In her subsequent press conference, Fed Chair Janet Yellen said the message of the rate hike should be that the “economy is doing well.”
The Fed announcement largely overshadowed the slew of economic data released earlier in the day, including a report from the Commerce Department showing an uptick in retail sales in the month of February.
The Commerce Department said retail sales inched up by 0.1 percent in February after climbing by an upwardly revised 0.6 percent in January. The slight increase came in line with economist estimates.
Excluding a modest drop in auto sales, retail sales rose by 0.2 percent in February after jumping by 1.2 percent in January. The increase in ex-auto sales also matched expectations.
A separate report from the Labour Department showed a modest uptick in consumer prices in February, while the National Association of Home Builders said its reading on homebuilder confidence jumped to a nearly twelve-year high in March.
Gold stocks showed a substantial move to the upside over the course of the session, driving the NYSE Arca Gold Bugs Index up by 7.8 percent. The jump lifted the index well off the two-month closing low set last Thursday.
Considerable strength was also visible among airline stocks, as reflected by the 3 percent gain posted by the NYSE Arca Airline Index. The index rebounded after ending the previous session at its lowest closing level in three months.
Energy stocks also rebounded along with the price of crude oil. Steel, commercial real estate and utilities stocks also saw notable strength on the day, moving higher along with most of the other major sectors
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