Futures rise as Fed wages war on inflation

[December 16, 2021]  By Shreyashi Sanyal

(Reuters) - U.S. stock index futures climbed 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.

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.

Recent readings on surging producer and consumer prices as well as the fast-spreading Omicron variant of the coronavirus have fueled anxiety as the benchmark S&P 500 inches closer to a record high.

"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."

Big technology stocks and banks were leading the gains in premarket trading. Shares in Tesla Inc, Microsoft Corp, Apple Inc, Meta Platforms Inc and Amazon.com Inc rose between 0.7% and 2.4%.

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

Bank stocks including JPMorgan Chase & Co, Morgan Stanley, Bank of America, Wells Fargo and Citigroup gained between 0.7% and 0.8%.

At 6:53 a.m. ET, Dow e-minis were up 255 points, or 0.71%, S&P 500 e-minis were up 38.5 points, or 0.82%, and Nasdaq 100 e-minis were up 147.25 points, or 0.9%.

Investors are also awaiting data from the Labor Department on weekly jobless claims, which is expected to rise to 200,000 last week from 184,000 in the week before.

Separately, data firm IHS Markit is scheduled to release manufacturing, services, and composite PMI surveys for December.

Lennar Corp fell 7.0% after the homebuilder missed analysts' estimates for quarterly profit as pandemic-led supply chain issues pushed lumber costs higher and delayed house deliveries.

(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Saumyadeb Chakrabarty)

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