S&P 500: positive dynamics prevails
Having declined during the Asian session, the dollar went on the offensive at the beginning of today's European session. As of this writing, DXY dollar futures are traded near 93.74, 27 points above the local low 93.47 hit during today's Asian session.
At the same time, the yield on 10-year US government bonds remains in the zone of local 5-month highs 1.705%, reached last week, confirming the propensity of investors to be active when buying on the stock markets.
Market participants are assessing the prospects for the Fed's monetary policy, after the publication of the minutes of the Fed's meeting on September 21 and 22, and the speech last Friday by Fed Chairman Jerome Powell at a conference on the occasion of the centenary of the Bank for International Settlements. Powell reaffirmed the central bank's intention to begin cutting back on bond purchases soon. Powell expects "higher inflation is likely to be longer than anticipated", but a rate hike now "would be premature". “Now is the time to wind down stimulus, not hike rates, and the Fed is on track to complete the stimulus winding process by mid-2022”, Powell said.
Thus, despite the beginning of the reduction in the volume of stimulus, the Fed's policy remains soft. According to the minutes of the September Fed meeting, only half of 18 executives expect that interest rates will need to be raised by the end of 2022, and almost all executives anticipate another rate hike in 2023.
The fact that investors are determined to accept the statements of the Fed leaders as a guide to action is evidenced by the continued growth of US stock indices. Thus, last week the S&P 500 and DJIA set new absolute records. For them, this was already the third consecutive week of growth, and this month, apparently, will also be one of the most successful for the American stock market.
The ongoing recovery in the US and global economies amid soft policies from the Fed and other major global central banks is fueling investor appetite for profitable risky assets. Rising commodity prices, primarily for energy carriers such as coal, oil, and gas, are contributing to the growth of shares of energy and mining companies, also pushing stock indexes up.
Today, futures for US stock indices are growing again. It is possible that in the absence of important macro statistics in today's economic calendar, the American trading session will also start on a positive wave.
Meanwhile, as of this writing, S&P 500 broad market index futures are traded near 4451.0, maintaining long-term positive momentum. As before, long positions remain preferable, and the breakdown of the local resistance level 4561.0 will be a signal for their buildup.
And yet, volatility will rise today, as usual, at the beginning of the American trading session, which is also likely to be facilitated by the publication (at 12:30 GMT) of the National Activity Index from the Federal Reserve Bank of Chicago. The degree of influence on the markets of this index is considered average. However, this is an index that assesses economic activity as a whole, as well as inflation risks, and its publication with a significant deviation of the indicator from the previous (0.29 in August) or forecast value may cause an increase in volatility in the market.