US Stocks gain after Fed's Powell comments

The US stocks were slightly up after swings between gains and losses in a choppy session on Wednesday, 14 July 2021, with the S&P 500 and the Dow Jones Industrial Average ticked higher, thanks to the Federal Reserve Chairman Jerome Powell statement that inflation will moderate and that the central bank plans to maintain its current monetary policies.

At the close of trade, the Dow Jones Industrial Average index advanced 44.44 points, or 0.13%, to 34,933. The S&P 500 index grew 5.09 points, or 0.12%, at 4,374. The tech-heavy Nasdaq Composite Index was down 32.70 points, or 0.22%, to 14,645.

Total 5 of 11 sectors inclined along with S&P 500, with consumer staples (up 0.92%) was top performing sector, followed by real estate (up 0.89%), utilities (up 0.84%), and information technology (up 0.73%) sectors, while energy (down 2.94%) was worst performer, followed by financials (down 0.5%), and materials (down 0.2%) sectors.

The gains in the Wall Street came amid a positive reaction to Federal Reserve Chair Jerome Powell's prepared remarks before the House Financial Services Committee. Powell reiterated the belief that "substantial further progress" towards the Fed's goals of maximum employment and price stability is "still a ways off," suggesting the central bank is not likely to begin tightening monetary policy anytime soon. The Fed chief also once again stressed that the Fed will provide "advance notice" before announcing any changes to its asset purchase program.

ECONOMIC NEWS: Fed Powell Feels It Appropriate To Continue Stimulus Until Substantial Further Progress - Federal Reserve chair Jerome Powell's, in its Semi-annual Monetary Policy Report to the Congress stated that central bank continues to expect that it will be appropriate to maintain the current target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee's assessment of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time.

As the Committee reiterated in our June policy statement, with inflation having run persistently below 2%, we will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time and longer term inflation expectations remain well anchored at 2%, Powell said.

Powell added that the Fed would continue to increase holdings of Treasury securities and agency mortgage backed securities at least at their current pace until substantial further progress has been made toward our maximum-employment and price-stability goals. These purchases have materially eased financial conditions and are providing substantial support to the economy.

Commenting on the current economic situation, Powell said that over the first half of 2021, ongoing vaccinations have led to a reopening of the economy and strong economic growth, supported by accommodative monetary and fiscal policy. Real gross domestic product this year appears to be on track to post its fastest rate of increase in decades. Conditions in the labor market have continued to improve, but there is still a long way to go. Labor demand appears to be very strong. However, the unemployment rate remained elevated in June at 5.9%, and this figure understates the shortfall in employment, particularly as participation in the labor market has not moved up from the low rates that have prevailed for most of the past year.

Inflation has increased notably and will likely remain elevated in coming months before moderating. Inflation is being temporarily boosted by base effects, as the sharp pandemic-related price declines from last spring drop out of the 12-month calculation. To avoid sustained periods of unusually low or high inflation, the Federal Open Market Committee's (FOMC) monetary policy framework seeks longer-term inflation expectations that are well anchored at 2%, the Committee's longer-run inflation objective.

Fed's Beige Book Finds US Economic Activity Displaying Moderate To Robust Growth - US overall economic activity strengthened further from late May to early July, displaying moderate to robust growth, according to the Federal Reserve's Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts. Sectors reporting above-average growth included transportation, travel and tourism, manufacturing, and nonfinancial services. Energy markets improved slightly, and agriculture had mixed results. Supply-side disruptions became more widespread, including shortages of materials and labor, delivery delays, and low inventories of many consumer goods.

Strained car inventories resulted in somewhat lower car sales despite steady demand, and home sales rose slightly despite limited supply. Nonauto retail sales grew at a moderate pace on balance, and tourism was buoyed by the further abatement of pandemic-related concerns. Residential construction softened in several Districts in response to rising costs, while commercial construction was mixed but up slightly on balance. Bank lending activity increased slightly or modestly in most Districts. The outlook for demand improved further, but many contacts expressed uncertainty or pessimism over the easing of supply constraints.

The Beige Book stated that three-quarters of districts reported either slight or modest job gains and the remainder reported moderate or strong increases in employment. Healthy labor demand was broad-based but was seen as strongest for low-skilled positions. Wages increased at a moderate pace on average, and low-wage workers enjoyed above-average pay increases. Labor shortages were often cited as a reason firms could not staff at desired levels, with firms in three Districts delaying expansion or scaling back services due to understaffing. Higher than average turnover and lower retention rates were reported in three Districts. All Districts noted an increased use of non-wage cash incentives to attract and retain workers. Firms in several Districts expected the difficulty finding workers to extend into the early fall.

Meanwhile, the book further noted that prices increased at an above-average pace, as seven Districts reported strong price growth and the rest saw moderate gains. Pricing pressures were broad-based and grew more acute in the hospitality sector, as the reopening of hotels and restaurants confronted limited supplies of materials and workers. Construction costs remained high, but lumber prices reportedly eased a bit. Container prices returned to very high levels after having moderated in the spring. Pricing power was mixed, as some contacts reported that high end-user demand enabled them to increase their prices and others said that input price pressures had reduced their profit margins. While some contacts felt that pricing pressures were transitory, the majority expected further increases in input costs and selling prices in the coming months.

Among Indian ADR, Tata Motors added 0.78% to $20.56, INFOSYS was up 1.62% to $21.39, Vedanta added 0.55% to $14.54. HDFC Bank added 1.26% to $74.02, WNS Holdings added 0.5% to $80.96, Wipro added 5.7% to $7.96, and ICICI Bank added 0.62% to $17.91, while Dr Reddys Labs shed 0.22% to $73.15.

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