08.04.202112:10 Forex Analysis & Reviews: S&P 500 hits record high close following Fed minutes

In late trade on Wednesday, the US S&P 500 index reached a new record closing high on the back of the central bank's intentions to continue providing monetary support to the stock market and the economy.

Exchange Rates 08.04.2021 analysis

As for the overall trading results, the stock indices closed mixed due to the strengthening of the oil and gas, technological, and financial sectors. The sectors of consumer goods, raw materials, and health care showed negative dynamics.

Thus, the broad-based benchmark S&P 500 increased by 0.1% to 4,079.95, marking its 18th record close of 2021. The Dow Jones Industrial Average also added 0.1% to settle at 33,446.26. At the same time, the Nasdaq Composite slipped by 0.1% to the level of 13,688.84.

Exchange Rates 08.04.2021 analysis

Throughout most of the trading day, the leading indices were moving in a sideways trend amid no significant drivers. However, at the end of the session, the S&P 500 and Dow Jones Industrial Average managed to edge up and close with gains. This growth was largely contributed by the US Fed March meeting minutes. According to data released, the central bank considers that the current leading indicators on interest rates have a stimulative effect on the economy of the United States. As a result, in March, the Federal Reserve left interest rates unchanged (near zero) and continued to purchase bonds at a rate of $120 billion a month.

At the same time, most of the stock market participants did not expect new fateful decisions from the Fed, especially given early statements about the central bank's intention to adhere to the existing monetary policy measures for as long as necessary. However, some investors hoped that the Fed would hint at disagreements among the bank's representatives regarding the near future. Traders lost hope after Fed leaders said that there was no risk of excessive inflation in the short term.

This year, concerns about inflation have repeatedly caused price fluctuations in the US stock market . More than once, investors have worried that strong growth in the US economy, coupled with the government's fiscal stimulus packages, could force the Federal Reserve to phase out the enhanced monetary support earlier than expected. Analysts say this will happen a bit later amid several consecutive months of strong employment growth.

Since the beginning of 2021, signs of permanent economic growth have caused mixed reaction from stock market participants. On the one hand, investors were bullish on stronger economic indicators confirming a recovery from the coronavirus pandemic. On the other hand, they feared US monetary policy tightening. Last Monday, the leading indices of the S&P 500 and DJIA reported record highs on the backdrop of the labor market report showing that US employers added 916,000 jobs in March.

Speaking of general sentiment, the US stock markets started the second quarter on a positive mode, which led to an accelerated rally in the stock indices. For example, on Wednesday, the securities of many companies - from Amazon.com to Carnival and Hess - increased by about 1.4%. L Brands shares soared by 3.6%, while Twitter stocks were up by 3.0%.

This week, the US 10-year Treasury yields have returned to normal after a frightening spike at the beginning of the year. The day before, the indicator fell to 1.653% from 1.656% on Tuesday, reporting its third straight session of decline.

Thus, tech stocks, which had come under pressure from rising borrowing costs, halted its endless rally due to falling debt yields. At the same time, many market participants are of the opinion that after returning to the normal economic activity, sectors closely tied to the state of the economy, including the banking and oil and gas sectors, will benefit most of all.

Meanwhile, the main indicators of the Asian stock markets showed mixed and uncertain performance. The Nikkei 225 index gained 0.1%, the Hang Seng Index sank by 0.9%, while the Shanghai Composite Index lost 0.1%.

The pan-European Stoxx Europe 600 was down 0.2%.

The Cboe Volatility Index, a measure of the stock market's expectation of volatility based on S&P 500 index options, fell by 5.30% to 17.16 points.

The US Dollar Index Futures gained 0.09% to trade at 92.430.

Irina Maksimova,
Analytical expert
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