U.S. benchmarks surged in the second half yesterday. The momentum carried into the evening hours, but weakness in the Treasury space overnight halted the rally, putting stocks once again on their backfoot ahead of the opening bell.
Powell noted that the Fed is committed to using their full range of tools, adding that inflation is soft and price pressures aren’t a threat. He continues his testimony today.
Powell’s been dovish: he even brought bullish tailwinds 2 weeks ago that set the markets on pace for last week’s surge. Can Powell be even more dovish than he has been?
Although last week’s push and pull held a floor of support, both the S&P and Nasdaq came to an unenthusiastic finish after decisively breaking below our momentum indicators again midday Friday.
The rebound from January’s late swoon has been miraculous and we must acknowledge that some degree of perfection, for the landscape we have, is already priced in; an accommodative Fed, $1.9 trillion in fiscal stimulus, and an improving vaccine rollout.
We don’t find inflation a headwind; in fact, it’s a tailwind from many perspectives, signaling an increase in demand and economic activity in the later innings of the pandemic.
Upon a marathon of votes Thursday night and into Friday morning, Democrats in the Senate have pieced together Biden’s plan through the budget reconciliation process. The news began lifting risk assets late Thursday and those tailwinds carried into the weekend.
The better jobs picture, at least through the data, sets the economy and the new Biden administration on a collision course when it comes to fiscal stimulus.
