US stocks are likely to soar for a second day as fears of a crisis in the Chinese real estate market subsided and the US Federal Reserve maintained current monetary stimulus for a little longer.
Futures contracts pegged to the Dow Jones Industrial Average gained 188 points, or 0.5%. S&P 500 futures rose 0.6% and Nasdaq 100 futures rose 0.6%.
Stocks related to a global economic rally rose in pre-trading hours. Freeport McMoRan shares were up 2%. Las Vegas Sands, which has a large exposure to China, rose 1.7%. Caterpillar added 1%. Energy stocks were also higher.
Hong Kong’s Hang Seng index rebounded more than 1% from losses this week, with Chinese real estate developer Evergrande Group gaining more than 17%. On Wednesday, the company eased fears somewhat by deciding to pay a local bond. Overnight, the company’s chairman said helping retail investors redeem investment products was a top priority, Reuters reported.
However, global investors are still waiting to see if the company will pay interest on a dollar bond due Thursday. And the Wall Street Journal reported Thursday that the Chinese government is urging local authorities to prepare for “possible storm” if Evergrande fails.
Shares closed higher across the board on Wednesday after the Federal Reserve left policy rates unchanged while signaling no immediate intention to end economic policy.
The Dow gained around 340 points, or 1%, for its first positive session in five and the best day since July 20. The S&P was up 0.95%, also posted a four-day losing streak, and had its best day since July 23. The composite ended the session 1.02% higher while the Russell 2000 outperformed the session by 1, 48% increase.
“If progress continues broadly as expected, the committee believes that moderation in asset purchases may soon be warranted,” a Fed statement said after the meeting. However, no schedule was given.
The central bank ran a $ 120 billion-a-month bond purchase program last year as the pandemic paralyzed the economy. As economic conditions improve, more members of the Federal Reserve’s Open Market Committee are now seeing the first rate hike in 2022.
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“The Fed has taken a positive note, recognizing that the economy is strong enough to stand on its own two feet and the central bank can begin removing the monetary stimulus it has provided since the beginning of the Covid crisis,” said Chris Zaccarelli, Chief Investment Officer of the Independent Advisor Alliance.
“While there could be some additional turmoil this fall, we are generally constructive about the US economy and believe that it would be worth buying any dips as fundamentals are still solid and the recession is more than at this point Seems to be a year away, ”he added.
Wednesday’s move wasn’t enough to keep stocks green for the week, however. The Nasdaq Composite is down 0.98% for the last three sessions, while the S&P and Dow are down 0.84% and 0.94%, respectively.
For the month, the S&P 500 and the Dow are both down about 3% and the Nasdaq is down 2%.
“We believe the S&P 500 has more headroom, but one of the biggest downside risks comes from valuations given the prospect of higher yields / ERPs, less liquidity and slower growth,” UBS said in a recent statement to clients.
On Thursday, the Department of Labor will publish the first jobless claims while several companies are on board for quarterly updates, including Darden Restaurants, which report before the market opens, while Nike and Costco Wholesale provide quarterly updates after the market closes. Flash estimates for September Manufacturing PMI and Services PMI are also released.
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