Andrew Harnik/AP
- US stock futures rose after Janet Yellen called for a ‘big’ stimulus package.
- The dollar slipped and bonds flatlined as investors rotated into riskier assets such as shares.
- Wall Street is preparing for life under President Joe Biden, with the inauguration later in the day.
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US stocks were set to open higher on Wednesday – the day of Joe Biden’s inauguration as the 46th president of the United States – while the dollar slipped and bond prices flatlined.
Despite the political pageantry, Wall Street’s focus was on Janet Yellen, Biden’s pick for Treasury secretary and a former Federal Reserve chair, who yesterday urged lawmakers to “act big” on coronavirus stimulus.
The winning streak was set to continue on Wednesday, with S&P futures up 0.32%. Dow Jones futures were 0.14% higher while Nasdaq futures had climbed 0.69%.
The dollar inched lower as investors pivoted away from so-called safe-haven assets towards stocks, indicating optimism about the economy.
Asian stocks climbed overnight, with China's CSI 300 rising 0.72% despite a new outbreak of coronavirus in the country. Hong Kong's Hang Seng climbed 1.08% and South Korea's KOSPI rose 0.71%.
Oil prices advanced as investors bet on higher future demand. Gold rose as the dollar fell.
Biden is set to be sworn in as president at midday eastern time. Jim Reid of Deutsche Bank said: "With the pandemic still raging and an economic crisis overlaid on top of that, Biden's presidency will begin with a pretty full in-tray.
"The policy measures can be expected to come thick and fast as the new administration aims to hit the ground running."
Wednesday is also the final day of Donald Trump's one-term presidency. Over four years in office he kept Wall Street guessing, showering executives with tax cuts in 2017 that drove markets higher, but also shaking US economic policy by launching a trade war with China.
Markets' focus is now on Biden's economic policy, in particular his planned $1.9 trillion stimulus package. The "reflation trade" - bets that stimulus and coronavirus vaccines will drive growth and inflation - has seen investors return to stocks that were neglected during the pandemic such as banks and industrial firms.
The European Stoxx 600 index has risen around 6% over the last month on stimulus and vaccine hopes, and was up a further 0.54% on Wednesday.
Focus has in particular been on Yellen, who on Tuesday made her intentions on stimulus clear. "Neither the president-elect, nor I, propose this relief package without an appreciation for the country's debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big," she told lawmakers.
She also said that taxes on the corporations and the rich would eventually need to rise, but not for the time being.
The dollar index slipped 0.11% on Wednesday morning to 90.4. Investors rotated out of the greenback towards equities, in a sign of market optimism. Traders also noted Yellen's commitment to letting markets determine the exchange rate.
Bonds fell marginally as investors bought up stocks. The yield on the 10-year US Treasury note climbed 0.1 basis points to 1.094%. Yields move inversely to price.
Gold rose 0.89% as the dollar slipped to $1,856.75 per ounce. Bitcoin fell 5.23% to $35,290.
The Brent crude oil price rose 0.77% to $56.33 per barrel, as traders bet an economic recovery in 2021 would fuel demand later in the year. WTI crude rose 0.92% to $53.47.
Jeffrey Halley, senior market analyst at currency firm Oanda, said: "In general, oil should retain a positive outlook until such a time as US Senate Republicans signal how supportive, or not, they will be of the proposed Biden stimulus initiatives."