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US open: Stocks rise as investors mull Fed statement; jobs data in focus

By Michele Maatouk

Date: Thursday 21 Mar 2019

US open: Stocks rise as investors mull Fed statement; jobs data in focus

(Sharecast News) - US stocks edged higher in early trade on Thursday as investors mulled fresh readings on manufacturing and jobs and continued to mull over a more dovish than expected policy statement from the Federal Reserve, which has prompted concerns about the US economy.
At 1355 GMT, the Dow Jones Industrial Average and the S&P 500 were up 0.2% at 25,788.38 and 2,829.93, respectively, while the Nasdaq was up 0.4% at 7,760.97.

Overnight, the US central bank stood pat on interest rates, as expected, holding steady on its target of between 2.25% and 2.5%. More strikingly, the central bank also made it clear that no further increases in its interest rate targets would be delivered this year, given inflation was waning and economic growth was slowing.

Federal Open Markets Committee members continued to indicate they believe the balance sheet runoff will end by September, while also slashing their US economic growth estimate for the year to 2.1%.

FOMC members also agreed to take the shears to the Fed's personal consumption expenditure (PCE) inflation forecast, dropping it to 1.8% from a previous 1.9%, while its core PCE estimate remained at 2%.

In the post-meeting press conference, Fed chair Jerome Powell said there was "no need to rush to judgment" when it came to its more cautious stance, with the Fed's policy on its balance sheet set to ensure a "smooth [and] predictable" end to its runoff.

James Hughes, chief market analyst at Axi Trader, said: "Yesterday's much-awaited FOMC meeting verdict certainly didn't fail to disappoint, with a significantly more dovish that expected message emerging. Just three months ago, the Fed was talking of two rate hikes this year, but now that's been revised down to none.

"With domestic growth revised lower and a slowing global economy being flagged too, even the prospect of cheaper borrowing was insufficient to shore up stocks."

Figures released by the Department of Labor earlier showed that US jobless claims, one of the most closely-followed indicators of the health of the jobs market, dropped more sharply than expected over the preceding week.

Initial jobless claims for the week ending on 16 March fell by 9,000 to 221,000. Economists at Barclays Research had forecast a reading of 225,000.

The four-week moving average meanwhile, which aims to smooth out the fluctuations in the data from one week to the next, was up by 1,000 to 225,000.

Secondary unemployment claims - which are not filed for the first time - dropped by 27,000 to 1.75m.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "The trend is a bit higher than last fall, because growth has slowed as the kick from the tax cuts and the plunge in gas prices has faded.

"We expect a gradual creep higher through mid-year, but claims will remain extremely low by historical standards, and the increase won't be enough to change peoples' very favourable view of the state of the labour market."

Elsewhere, the Philadelphia Fed business activity index rose to 13.7 in March from -4.1 the month before, which was the first negative reading in almost three years. This was well above consensus expectations for a reading of 4.6.

The current new orders index improved to 1.9 from -2.4 in February, while the current shipments index was up 25 points at 20.0.

Shepherdson said: "The 17.8-point leap in the headline index reverses most, but not all, of February's unexpectedly steep 21.1-point plunge, and brings the Philly index back into line with the Empire State survey.

"But the underlying trend is still downwards, and we'd be surprised if this report means that the index has bottomed. The downshift in Chinese manufacturing has led the rollover in global PMIs and the lags suggest that further declines are coming in the DM numbers."

In corporate news, shares in Micron Technology surged after the chipmaker's second-quarter earnings beat expectations and it said it sees a recovery in the memory chip market.

Shares in Olive Garden owner Darden Restaurants rose after its third-quarter profit and sales topped analysts' expectations and the company boosted its full-year guidance

Going the other way, Biogen tanked nearly 28% after the biotech company said it was halting research for its experimental Alzheimer's drug, which was unlikely to be effective.


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