US open: Wall Street opens firmer as rising interest rate fears recede
Trading in US stocks started on a firmer footing on Monday as investors on Wall Street shook off worries about the recent inflation picture and rising interest rates while thumbing through a slew of data releases ahead of Jerome Powell's first testimony as Federal Reserve chairman.
At 1515 GMT, the Dow Jones Industrial Average had moved up 0.83%, while the S&P 500 and Nasdaq were 0.59% and 0.68% higher, respectively.
Fedspeak was in focus as St Louis Fed President James Bullard gave a speech at the National Association of Business Economics in Washington where he said it would be a smart move for the Federal Reserve to periodically review its inflation framework.
However, any change would require a firm guarantee that a new set up would provide benefits over the current 2% target, he said.
In order to change the framework, "you would have to get buy-in from the political side. You would have to get buy-in from the larger financial community."
Several Fed chiefs had previously called for a review of how the Fed sets its inflation target and "that is a good thing to do and I am hopeful the committee will go ahead and do it," Bullard explained.
Fed Vice chairman Randall Quarles was also due to speak at the same event, later in the day.
In any case, the week's main attraction still lay ahead, on Tuesday, when Fed chairman Jerome Powell was set to deliver his first congressional testimony.
Investors would be looking for any clues on the pace of future monetary tightening given the split in the market between those who expected the US central bank could hike rates four times over the course of 2018 and those who were still anticipating only three hikes.
Rebecca O'Keeffe, head of investment at Interactive Investor, said Powell has had a baptism of fire in the three weeks since he took on his new role, with markets experiencing huge volatility on fears that inflation will see the Fed raise rates more aggressively than anticipated.
"The opportunity to establish what Mr Powell thinks about the US economy, inflation, interest rates and asset values is therefore highly important for markets.
"Current market valuations were one of the main talking points from Warren Buffett’s annual letter, as he gave investors his view of the world. His efforts to deplete his burgeoning war chest and pull the trigger on a major deal in 2017 were all scuppered by his inability to find anything that he believed offered a 'sensible purchase price'. For the ultimate deal maker and value investor to conclude that the market is not offering any attractive buying opportunities is a potentially worrying sign for investors."
On the corporate front, Dean Foods tumbled 15% after the company fell short of earnings estimates for the fourth quarter and offered guidance below consensus
Hibbett Sports dropped off 2.57% out of the gate, despite its fourth-quarter earnings per share beat analysts' expectations, and General Electric fell back 3.21% after it nominated three new candidates to its board of directors as the size of the board is cut to 12 directors from 17.
UPS shares picked up 0.50% following news the parcel delivery service is suing the European Union's antitrust watchdog for €1.74bn over its decision to block a planned merger with TNT Express.
On the macroeconomic side of things, new US home sales fell to an annualised rate of 593,000 for January after an upwardly-revised 643,000 for December (consensus: 647,000).
Despite the big miss, Ian Shepherdson at Pantheon Macroeconomics was quick to point out how net revisions of 42,000 to the prior three months of data had largely offset Monday's 'miss'.
"January sales were well below the pace implied by the lagged mortgage applications numbers, about 675,000, so we look for a hefty rebound in February sales. Any weakening on the back of the rise in mortgage rates likely won't be visible until late spring at the earliest. In the meantime, inventory remains tight - though it is rising - pushing up prices by about 5% y/y," he said.
Elsewhere, the Chicago Fed's index of national economic activity showed activity relaxing to a positive 0.12 in January from a downwardly revised but positive 0.14 in December, owing mainly to a slowdown in factory activity.
The index, a measure of activity levels in the US economy, had been moving in a narrow band over recent months, with October's reading of positive 0.87 being the highest for the volatile index since a positive 0.94 was recorded in December 2006.
The index's less-volatile three-month moving average fell to positive 0.12 in January from positive 0.26 in December.