U.S. stocks extended their gains today after the FOMC minutes released late Thursday suggested that Federal Reserve Board was looking for higher inflationary pressure to the US economy before further increases in the interest rate would be considered.
The Dow Jones Industrial Average futures lifted off from its low for the day at 16679 to hit 16959 as at the time of this news report, for a gain of 290 points. The S&P 500 and the Nasdaq Composite index also posted gains. The US stock markets have seen an unprecedented rise in the last three years, as near zero interest rates have provided cheap credit for companies, investors and individuals to do business and to invest in the capital markets.
In minutes from the Fed’s September 16-17 2015 meeting released Thursday October 8, central-bank officials were mindful of the low inflation in the US. Inflation has been under the 2% target since the latest quantitative easing programs were initiated in 2012. Inflation is not expected to exceed this target until 2018, barring any unforeseen market effects.
With two more FOMC meetings for 2015, investors are beginning to brace up to the reality of a rate hike not happening this year, according to notable equity traders. Fed-funds futures, used by investors and traders to place bets on central-bank policy, showed on Thursday a 6% likelihood of a rate increase during the Fed’s Oct. 27-28 policy meeting, according to data from CME Group. The odds were 39% for the December meeting, compared with 44% before last week’s disappointing U.S. jobs report for September.
The minutes seem to have served as a fillip to the US stock markets after disappointing jobs data the week before. The Dow Jones Industrial Average has gained about 7% after the August dip in value fuelled by poor Chinese economic data.
“We do need the data to start supporting a liftoff story again, and we really haven’t gotten that lately,” said Win Thin, a strategist at Brown Brothers Harriman.
More interest in US stocks is likely to come as the third-quarter earnings season kicks off. Traders on the AG Markets MT4 platform can look to trade some of these listed stocks as the earnings numbers are released to the market.