Wall Street set to rise as Fed wages war on inflation

3 minute read

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 29, 2021. REUTERS/Brendan McDermid

Register now for FREE unlimited access to Reuters.com
  • Fed to end bond purchases, signals rate hikes in 2022
  • Big tech stocks, banks lead early gains
  • Lennar slips on missing quarterly profit
  • Futures up: Dow 0.62%, S&P 0.64%, Nasdaq 0.52%

Dec 16 (Reuters) - Wall Street's main indexes were set to climb on Thursday after the Federal Reserve announced a faster wind-down of its pandemic-era stimulus, calming some nerves around surging price pressures.

The U.S. central bank said on Wednesday it would end its bond purchases in March and signaled three quarter-percentage-point interest rate hikes by the end of 2022. read more

Fed Chair Jerome Powell said the U.S. economy no longer needed increasing amounts of policy support as annual inflation has been running at more than double the central bank's target in recent months, while the economy nears full employment.

Register now for FREE unlimited access to Reuters.com

"Is the 'Santa rally' finally here? Markets certainly seem to have a spring in their step ... the prospect of three interest rate hikes in 2022 would suggest the central bank has a clear plan to not let inflation get out of control," Russ Mould, investment director at AJ Bell, wrote in a client note.

"Equally, it isn't being too aggressive to trip up the economy. This sense of balance is exactly what investors want, and an upbeat tone from the Fed certainly seems to have rubbed off on markets."

Recent readings on surging producer and consumer prices as well as the fast-spreading Omicron variant of the coronavirus have fueled anxiety, but with most of the biggest market-moving events for the year now over, the benchmark S&P 500 (.SPX) inched closer to a record high.

"I would say that a sprint to the finish likely is what this market should expect," said Art Hogan, chief market strategist at National Securities in New York.

"There's a real good chance that a lot of the things that have caused turbulence in both November and much of December are now in the rear view mirror, and markets might now be able to glide higher."

Big technology stocks and banks were leading the gains in premarket trading. Shares in Tesla Inc (TSLA.O), Microsoft Corp (MSFT.O), Apple Inc (AAPL.O), Meta Platforms Inc (FB.O) and Amazon.com Inc (AMZN.O)rose between 0.2% and 1.5%.

Bank stocks including JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N), Bank of America (BAC.N), Wells Fargo and Citigroup (C.N) gained between 1.4% and 1.7%.

At 8:33 a.m. ET, Dow e-minis were up 224 points, or 0.62%, S&P 500 e-minis were up 30.25 points, or 0.64%, and Nasdaq 100 e-minis were up 85.25 points, or 0.52%.

Data showed the number of Americans filing new claims for unemployment benefits increased moderately last week, remaining at levels consistent with tightening labor market conditions. read more

Lennar Corp (LEN.N) fell 4.9% after the homebuilder missed analysts' estimates for quarterly profit as pandemic-led supply chain issues pushed lumber costs higher and delayed house deliveries.

Data firm IHS Markit is scheduled to release manufacturing, services, and composite PMI surveys for December later in the day.

Register now for FREE unlimited access to Reuters.com
Reporting by Shreyashi Sanyal in Bengaluru; Editing by Saumyadeb Chakrabarty and Maju Samuel

Our Standards: The Thomson Reuters Trust Principles.