Market Snapshot: U.S. stocks poised for muted trade as investors watch for clues on outlook from Fed

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What’s driving the market?

Optimism about the outlook for the business climate is growing as more Americans get vaccine doses in their arms and as Washington aims for more spending measures to help facilitate a fuller recovery for from COVID-related damage.

Investors will await an account of the Fed’s two-day meeting on March 16-17, set to be released at 2 p.m. Eastern Time, at which policy makers raised their forecasts for U.S. economic growth and inflation, but emphasized that accommodative monetary policy would hold in place until 2023.

However, the market has appeared to push back on those projections, with bond yields rising rapidly this year on expectations that the accelerating economic recovery from the pandemic could spur higher inflation.

Market participants on average are expecting four, quarter-percentage point rate increases by the end of 2023 from the current range of 0% to 0.25%.

“We expect the minutes to confirm that the Fed is not considering to start normalization sooner than it pledged to do so, which could allow stock indexes to continue trending north,” wrote Charalambos Pissouros, senior market analyst at JFD Group.

“Even though officials upgraded their economic and inflation forecasts—inflation is seen at 2.4% this year, Fed Chair Powell clearly said that this will be temporary and would not meet their standards,” wrote Pissouros.

“He also stuck to his guns that it is too early to discuss tapering [quantitative easing],” but some skeptics are expecting that the Fed could indicate plans to taper its bond-buying program as early as the end of this year.

A rise in bond yields has abated somewhat, with the 10-year Treasury note yield TMUBMUSD10Y, 1.661% at around 1.65% Wednesday morning from 1.72% on Friday. The retreat in benchmarks bond yields has helped to foster some appetite for technology stocks which have benefited from a low interest rate regime.

Meanwhile, JPMorgan Chase & Co. JPM Chairman and CEO Jamie Dimon published his annual letter to shareholders on Wednesday, and offered an upbeat view of the economy.

“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom,” the executive wrote. “This boom could easily run into 2023 because all the spending could extend well into 2023.” 

Which companies are in focus?

• Target TGT, +0.04% on Wednesday announced a commitment to spend more than $2 billion with Black-owned businesses by the end of 2025. 
• XPO Logistics Inc. XPO said Wednesday said it has more than 1,400 jobs available in North America, as the trucking company said it is accelerating hiring to meet growing demand.
• LumiraDX Ltd., a point of care diagnostics testing company, is going public via a merger with special-purpose acquisition corporation, or SPAC, CA Healthcare Acquisition Corp. CAHCU, -0.50%,  in a deal with a pro forma enterprise value of about $5 billion. 
• Shares of MSC Industrial Direct Co. MSM dropped in premarket trading Wednesday after the metalworking and maintenance, repair and operations (MRO) company reported a fiscal second-quarter profit that topped expectations but sales that fell shy.
• AppLovin Corp. APP a maker of software for mobile app developers, set terms for its initial public offering on Wednesday, with plans to offer 25 million shares priced at $75 to $85 each. 
•  Coinbase Global Inc. COIN, +3.70% revealed late Tuesday preliminary first-quarter revenue that topped $1 billion, surpassing revenue for all of last year, and a quarterly profit that approached $1 billion. The crypto trading platform is expected to debut on equity markets next week and released preliminary results for the January-March period and guidance for the full year 2021.

How are other assets faring?

• The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, fell less than 0.1% to 92.258.
• The yield on the 10-year Treasury note TMUBMUSD10Y was up 0.4 basis point at 1.66%. Yields and bond prices move in opposite directions.
• Oil futures were trading higher, with the U.S. benchmark CL. 1, up 48 cents, or 0.9%, at $59.81 a barrel on the New York Mercantile Exchange.
• Gold futures were lower, with the June contract GCM21, -0.40%  shedding $8.60, or 0.5%, to $1,734.30 an ounce on Comex.
• In Europe, the Stoxx 600 index SXXP slipped 0.1%, while London’s FTSE 100 UKX jumped 0.7%.
• In Asia, the Shanghai Composite SHCOMP finished 0.1% lower, Hong Kong’s Hang Seng HSI, -0.91% closed down 0.9%, while Japan’s Nikkei 225 NIK edged up 0.1%.