On the day of signing the bill, which will provide the US economy with the aid package worth $ 1.9 trillion, the US stock market climbed to new historic heights. We are talking about the closing levels on the New York Stock Exchange on the indices S&P 500 equal to 3,939 points and Dow Jones Industrial Average at 32,486 points.
U.S. President Joe Biden signed an aid package for the economy battered by the coronavirus on Thursday, enacting his first major piece of legislation and paving the way for a faster economic rebound. If the economy grows by 6.5 percent in 2021 as a result of the aid, as the OECD assumed in its latest forecasts, it will be the highest economic growth in the United States since 1984. The plan includes a new round of direct payments of up to $1,400 for most adult Americans, extends federal unemployment benefits of $300 a week and provides hundreds of billions in aid to states and local governments.
After Thursday's record highs on Wall Street on Friday morning, U.S. index futures appear to be rising further. In addition to yesterday's signing, Joe Biden also delivered an address to the nation in which he called for more vaccinations in the United States to create a greater sense of normalcy in the country ahead of July 4, Independence Day. On Thursday morning, the CDC announced that a total of 98.2 million doses of the COVID-19 vaccine had been administered in the U.S. Risk appetite may also have been exacerbated by the return of stability in the bond market after the recent sharp rise in long-term interest rates and reports of an unexpected increase in U.S. job openings in January. Thus, it appears that the rise at the long end of the curve is a problem that Wall Street can digest, with the short end sitting low thanks to zero interest rates. Theoretically, the steeper the yield curve, the better the chances of a strong economic recovery.
Excellent sentiment also seemed to prevail in European stock markets after the statement from the European Central Bank. Europe's major stock exchanges closed higher during Thursday's session, with Germany's DAX rising to record levels after the European Central Bank left monetary policy unchanged and signaled a faster pace of bond purchases in the second quarter while keeping the same €1.85 trillion Pandemic emergency purchase program (PEPP) pool. To date, €810 billion has been spent and the scale of monthly purchases in February was €59.9 billion. The ECB also runs the APP programme, under which it purchases EUR 20 billion worth of bonds every month.
Thus, it seems that only the US Fed has not yet joined the group of major central banks that have not yet reacted to the rise in bond yields, explaining the rise in interest rates by the market's expectation of a faster pace of economic recovery. The Federal Reserve sees no problem with the rising cost of funding and government and corporate debt.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
76.44% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
