Stock futures soar as Bernanke soothes on tapering

Dollar sinks further versus yen; gold surges

 

By Kate Gibson and Barbara Kollmeyer, MarketWatch

NEW YORK (MarketWatch) — U.S. stock futures rallied Thursday, a day after Federal Reserve Chairman Ben Bernanke emphasized that the central bank won’t be in a hurry to raise rates.

Stock futures retained the bulk of their gains after economic reports had the price of U.S. imports falling 0.2% in June and weekly jobless claims rising by 16,000 to 360,000. 

A sharp tumble for the dollar after the Bank of Japan cut its growth forecast also drove stock futures higher.

Futures for the Dow Jones Industrial Average DJU3 -0.06% jumped 117 points, or 0.8%, to 15,360, while those for the Standard & Poor’s 500 index SPU3 -0.11% gained 15.1 points, or 0.9%, to 1,664.10. Futures for the Nasdaq 100 index NDU3 -0.03% surged 26 points, or 0.9%, to 3,022.25.

The S&P 500 SPX +1.36% ended Wednesday little changed but within less than a percentage point of its all-time high.  

• Need to Know: Crucial gut checks before the U.S. markets open

Ishaq Siddiqi, market strategist at ETX Capital, said in a note that Bernanke’s comments caught markets by surprise, as they were a “sharp contrast to the taper talk of recent weeks which prompted a rout across global risk assets.”

In a question-and-answer session after a speech to economists after the close of Wall Street’s regular session, Bernanke said there wouldn’t be an “automatic increase in interest rate when unemployment hits 6.5%.”

Given the weak labor market and low inflation, “it may be well sometime after we hit 6.5% before rates reach any significant level,” he said.

“I think he’s reassured markets that tapering of QE3 [quantitative easing] very likely beginning in September doesn’t mean he’s beginning to tighten monetary policy,” said Henrik Drusebjerg, senior strategist at Nordea Bank. “He will be stimulating less, but that’s not the same as tightening. The Fed will be there, holding our hand for quite some time.”

Bernanke’s remarks came just a few hours after the release of Federal Open Market Committee minutes from the June 18-19 meeting, which showed multiple members looking for improved job-market statistics before cutting back on bond-buying purchases.

The yield on the 10-year Treasury bond 10_YEAR -1.36% fell 6 basis points to 2.587%.

Wall Street stocks had closed mostly flat after the Fed minutes and ahead of Bernanke’s speech. The Dow Jones Industrial Average DJIA +1.11% fell 8.68 points, or less than 0.1%, Wednesday to end at 15,291.66.

Later in the day, the federal government is projected to record a $115 billion budget surplus in June, a sharp reversal from last year’s $60 billion deficit in the same month. That data are due at 2 p.m. Eastern time.

The dollar moved dramatically lower across the board, but in particular against the Japanese yen, falling further below 100 yen. The pair last traded at ¥99.43. The dollar had been weakening ahead of Bernanke’s comments, but took a bigger hit after he spoke. It then moved further south after the Bank of Japan cut its outlooks for growth and inflation.

Asia stocks rallied, with the exception of Japan stocks, which were volatile in the wake of the Bank of Japan comments and finished up around 0.4%. The biggest gain was for the Shanghai Composite Index CN:SHCOMP -1.71% , which surged 3.2% after a 2.2% rise on Wednesday.

Mining stocks and oil producers led the charge in Asia, moving in step with surging commodity prices. European stocks also jumped.

Crude oil CLQ3 -0.36% pulled back below $106 a barrel after the International Energy Agency predicted a large increase in production next year, while gold GCQ3 -0.27% soared 3.1% to $1,286.70 an ounce.

U.S. retailers are scheduled to report same-store sales data for June. First out of the gate, Costco Wholesale Corp. COST +1.98% reported same-store sales for the five-week period to July 7 rose 6%, which beat Thomson Reuters estimates for a rise of 5.4%.

Shares of Rockwell Medical Inc. RMTI +15.69% jumped in premarket trade after a drug used for treating kidney disease performed well in a study.

Shares of Yum Brands Inc. YUM -1.15% could draw attention. After Wednesday’s close, the food company reported second-quarter adjusted earnings fell to 56 cents a share from 67 cents a share a year ago, but still beat analysts’ estimates of 54 cents a share. Read: Yum, Costco, Gap are Thursday's stocks to watch.

Kate Gibson is a reporter for MarketWatch, based in New York. Follow her on Twitter @MWKateGibson. Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @MWBarbaraKollmeyer.

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