US open: Wall Street opens firmer as tech stocks pull indices higher
Wall Street trading kicked off with all major indices opening firmer on Friday following on from highs seen at the end of the previous session, with another round of Fedspeak very much in focus.
At 1500 GMT, the Dow Jones Industrial Average and Nasdaq had moved up 0.65% and 0.66% respectively, while the S&P 500 grew 0.61% firmer, helped in part by a pullback in bond yields as the key US 10-year Treasury note dropped below 2.9%.
David Morrison, senior market strategist at GKFX, said: "Despite these gains, the only thing which anyone can say with certainty is that the jury's still out when it comes to predicting the next big move for US stock indices."
Morrison pointed out that so far this week all major indices had failed to break conclusively to the up or downside, reflecting uncertainty amongst investors.
Strategists at Bank of America-Merrill Lynch were of a similar view, pointing out that the previous week's $13.2bn of inflows into equities, reflecting a higher growth/higher rates backdrop, had not been reflected in other flows.
"[...] inflows to deflationary winners of tech, IG bonds, EM bonds/equities continues.
"Recent 5 months of lower US dollar & higher US bond yields rare (<10% of past 50-year history, Table 1, though v common in Emerging Markets); has coincided with bouts of inflation and/or market volatility...on average inflation rose 2ppt, equities fell 9% and volatility rose 22ppt; higher wages remains the obvious risk to investors; higher wages & peak profits/growth much less anticipated," they said.
Earlier this week, there was a number of occasions on which rallies were curtailed by aggressive selling. This was particularly apparent on Wednesday, after the release of minutes from the Fed’s last FOMC meeting at the end of January, when the major indices reversed initial gains for a high-to-low swing of 2% in both the Dow and the S&P.
"We may get some resolution by tonight's close. However, investors may be wary of taking on too much risk ahead of new Fed Head Jerome Powell’s testimony in Washington next week on monetary policy. Once again, bond yields will be key as the 10-year still threatens a break above 3.0%," said Morrison.
On a related note, in an interview with Bloomberg on Thursday, US Treasury Secretary Steven Mnuchin dismissed concerns about rising wages, saying they won’t necessarily prompt a rise in inflation.
"There are a lot of ways to have the economy grow...You can have wage inflation and not necessarily have inflation concerns in general," he said.
With this in mind, potentially market moving remarks were possible on Friday from New York Fed President William Dudley and Boston Fed chief Eric Rosengren at the Chicago Booth School of Business's Fed policy forum at 1515 GMT, and separately those of Cleveland Fed President Loretta Mester at 1630 GMT, as well as a speech from San Francisco Fed President John Williams at 1840 GMT.
On the corporate front, US food company General Mills made a move into the pet food market as it agreed to buy Blue Buffalo for $40 per share in cash, which is around $8bn. Blue Buffalo shares surged 16.84%, while General Mills fell off 3.86%.
Chemical company Albermarle moved ahead 2.45% after it hiked its quarterly dividend by 5% to 33.50 cents a share.
Hewlett-Packard shares jumped 9.63% after the tech group reported a strong first quarter that beat earnings expectations and raised its full-year projections.
Xcerra lost 0.21% after the semiconductors and electronics testing firm announced it would terminate its sale to a Chinese group, citing difficulties receiving federal approval was too much for the $580m deal.