U.S. stocks staggered on Thursday as investors contemplated the Federal Reserve’s views on the economy. Futures rallied in the previous few days. However, the S&P 500 declined by 0.5%. The Stoxx Europe 600 Index also dropped by 0.4%. On the other hand, the MSCI Asia Pacific Index climbed up by 0.5%.
The last session was very volatile. The S&P 500 lowered as Chairman Jerome Powell stated that the pandemic could inflict longer-lasting damage on the economy than the markets expected. Even though the Fed signaled it would keep rates near zero, possibly for several years, if it wasn’t enough to lift the mood.
The central bank also stated that it would maintain the current rate of bond purchases. However, 10-year Treasury yields tumbled down by 0.72%.
Earlier in the week, U.S. equities skyrocketed more than 40% from their March lows. This was the result of central-bank asset purchases, along with unprecedented stimulus boosted demand for risk assets. The Nasdaq 100 also jumped to a record high as Tesla surpassed $1,000.
What do analysts say?
The United States definitely needs additional fiscal stimulus – noted Treasury Secretary Steve Mnuchin on Wednesday.
Sameer Samana, the senior global market strategist at Wells Fargo Investment Institute, also said that profit-taking seems to be underway after the Fed didn’t deliver any new measures. And it’s not as easy for investors to take risks at this point.
Meanwhile, Savita Subramanian, Bank of America Corp.’s chief U.S. equity strategist, thinks that some stocks may be the beneficiaries of trillions of dollars in economic stimulus from the Federal Reserve. Facebook Inc., Netflix Inc., Amazon.com Inc., and Alphabet Inc. will probably rally if liquidity increases.
However, the stocks aren’t out of the woods yet. Any complication may cause another collapse and reverse all gains. Considering that additional support will be hard to come by, it’s a daunting possibility. The Organisation for Economic Co-operation and Development cautioned that policymakers couldn’t risk a premature withdrawal of lifelines to businesses and vulnerable people.