By Investors Hub
The major U.S. index futures are pointing to a modestly lower opening on Tuesday, with stocks likely to give back some ground following the rally seen over the two previous sessions.
The downward momentum on Wall Street comes following the release of new Federal Reserve Chairman Jerome Powell?s prepared remarks before the House Financial Services Committee.
Powell reiterated the Fed?s view that further gradual increases in interest rates will best promote attainment of both of the central bank?s dual objectives.
?While many factors shape the economic outlook, some of the headwinds the U.S. economy faced in previous years have turned into tailwinds,? Powell says in his prepared remarks.
He added, ?In particular, fiscal policy has become more stimulative and foreign demand for U.S. exports is on a firmer trajectory.?
Powell also said financial conditions remain accommodative despite recent volatility and highlighted strong consumer spending and job growth.
Extending the rally seen last Friday, stocks moved sharply higher over the course of the trading session on Monday. With the continued strength on the day, the major averages further offset the sell-off seen earlier this month.
The major averages finished the session firmly in positive territory. The Dow soared 399.28 points or 1.6 percent to 25,709.27, the Nasdaq jumped 84.07 points or 1.2 percent to 7,421.46 and the S&P 500 surged up 32.30 points or 1.2 percent to 2,779.60.
A continued drop by treasury yields contributed to the strength on Wall Street, as the ten-year yield pulled back further off the ten-year closing high set last Wednesday.
The decrease by treasury yields was partly in reaction to dovish comments by St. Louis Federal Reserve President James Bullard.
Bullard, who is not a voting member of the Fed’s policy committee this year, warned against aggressive interest rate hikes that are not supported by incoming data.
“If the Committee raises the policy rate substantially from here without other changes in the data, the policy setting could become restrictive,” Bullard said at a National Association of Business Economics conference.
The rally on Wall Street came even as traders looked ahead to congressional testimony by new Federal Reserve Chairman Jerome Powell.
Powell is scheduled to testify before the House Financial Services Committee on the Fed’s Semiannual Monetary Policy Report on Tuesday.
On the U.S. economic front, the Commerce Department released a report unexpectedly showing a steep drop in new home sales in January.
The report said new home sales plunged by 7.8 percent to an annual rate of 593,000 in January after slumping by 7.6 percent to an upwardly revised 643,000 in December.
The continued decrease surprised economists, who had expected new home sales to jump by 3.2 percent to a rate of 645,000 from the 625,000 originally reported for the previous month.
Telecom stocks showed a substantial move to the upside on the day, resulting in a 4 percent jump by the NYSE Arca Telecom Index. With the sharp increase on the day, the index reached its best closing level in over a year.
Arista Networks (ANET), Acacia Communications (ACIA) and Cincinnati Bell (CBB) turned in some of the telecom sector’s best performances.
Significant strength was also visible among semiconductor stocks, as reflected by the 2.2 percent gain posted by the Philadelphia Semiconductor Index. The gain lifted the index to a one-month closing high.
Computer hardware stocks also saw considerable strength, with the NYSE Arca Computer Hardware Index surging up by 1.9 percent.
HP Inc. (HPQ) extended the upward move seen last Friday after JPMorgan Chase upgraded its rating on the computer and printer maker’s stock to Overweight from Neutral.
Transportation, brokerage and pharmaceutical stocks also moved notably higher, reflecting another day of broad based buying interest on Wall Street.
Adedapo Adesanya