US equities hit fresh record highs ahead of the Fed’s policy meeting

Vrasidas Neofytou
Head of Investment Research

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The Dow Jones and S&P 500 indices reached fresh record highs supported by the ongoing rally in value and cyclical stocks on the back of a faster-than-expected post-pandemic economic re-opening.

The tech-heavy Nasdaq Composite, staged a comeback as investors shrugged off inflation fears and began rotating back to growth and technology companies as bond yields fall.

Market participants now await the next two-day Federal Reserve policy meeting, to be held later this week, for further clarity on the central bank’s timeline to taper monetary support. 

Although the Fed is not expected to take any action, its forecasts for inflation, interest rates, employment and the economy could influence market direction.

The US dollar index, hovers near a 5-month low in the 90 region, as forex traders speculate that the Federal Reserve will reiterate its dovish policy until maximum employment and higher wages are reached. 

Despite a hotter-than-expected consumer inflation reading for May, the 10-year US Treasury yield which influences mortgages and other important lending rates, fell to 1.45%, its lowest level in 3 months, and well below its 2-year peak of 1.77% reached in March.

The price of Gold has lost more than 2% this week, falling back below 1,850 dollar per ounce, as the Federal Reserve eases concerns about inflation and downplays any talk for tapering its stimulus measures.

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