by Tyler Durden at ZeroHedge
One day before what everyone knew would be a hawkish pivot by the Fed, the mood was dour with tech names tumbling and futures hanging one for dear life. One day after, Jerome Powell confirmed he would go full Jean-Claude Trichet as the Fed would not only turbo-taper into a sharply slowing economy, ending its QE program by March but then proceed with hiking rates as many as 3 times in 2022 (more than the 2 hike consensus), with the BOE shocking markets moments ago with a surprise rate hike and even the ECB trimming its turbo QE, and futures are…. at all time highs. That’s right – eminis are higher by 140 points in 24 hours because the Fed was more hawkish than consensus expected. At 8:00 a.m. ET, Dow e-minis were up 215 points, or 0.61%, S&P 500 e-minis were up 27.25 points, or 0.57%, and Nasdaq 100 e-minis were up 100 points, or 0.61%.
Treasury yields jumped alongside European bonds after the BOE became the first major central bank to raise rates since the pandemic, while the dollar fell and the pound jumped. The Euro also hit session highs after the ECB seemed to turn ever so slightly more hawkish as its monthly QE is set to shrink in the coming year.
“The market likes facts it can digest. With the uncertainty now gone, it finds relief,” said Frederik Hildner, a portfolio manager at Salm-Salm & Partner. Gradual rising rates “provides more firepower for the next downturn, as it displays the ability normalize monetary policy.”
On Wednesday, Jerome Powell said the U.S. economy no longer needed increasing amounts of policy support as annual inflation has been running at more than double the central bank’s target in recent months, while the economy nears full employment. Recent readings on surging producer and consumer prices as well as the fast-spreading Omicron variant of the coronavirus have fueled anxiety as the benchmark S&P 500 inches closer to a record high.
“Is the Santa Rally finally here? Markets certainly seem to have a spring in their step… the prospect of three interest rate hikes in 2022 would suggest the central bank has a clear plan to not let inflation get out of control,” Russ Mould, investment director at AJ Bell wrote in a client note.
“Equally, it isn’t being too aggressive to trip up the economy. This sense of balance is exactly what investors want, and an upbeat tone from the Fed certainly seems to have rubbed off on markets” Bell said, clearly goalseeking his narrative to the market’s response as just 24 hours later he would be saying just the opposite when futures were tanking of hawkish Fed fears.
Big tech stocks and banks led gains in premarket trading. Shares in Tesla, Microsoft, Meta and Amazon.com rose between 0.7% and 2.4%, with the lift pushing Apple shares nearer to an historic market value of $3 trillion. Bank stocks including JPMorgan, Morgan Stanley, Bank of America, Wells Fargo and Citigroup all gained between 0.7% and 0.8%. Here are some of the biggest U.S. movers today:…
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