Wall Street positive, with the Dow Jones rising 0.30% to 32,717 points, the Nasdaq rising 0.43% to around 13,035 points and the S&P 500 making + 0.39% to 3,924 points. Concerns about a sudden rise in inflation have been allayed with the publication of the data on consumer spending and personal income.
The data showed that the core component of the PCE price index – closely monitored by the Fed for monetary policy decisions – rose by just 0.1% on a monthly basis in February, in line with expectations. On an annual basis, the increase was 1.4%, slightly below the 1.5% expected by the consensus. Looking at the data released, US consumer spending fell 1%, after a 3.4% jump in January. On the other hand, personal income slipped by 7.1%, after a 10.1% jump the previous month. Economists interviewed by Reuters had predicted a 0.7% decline in consumer spending and a 7.3% decline in personal income.
In the spotlight today the rises in the shares of companies that would benefit most from the total reopening of the economies and the end of the lockdown, such as United Airlines and Carnival.
Buy also on banks, after a positive news from the Federal Reserve for the sector. American banks, the Fed announced yesterday, will be able to go back to increasing the coupons in favor of their shareholders and the amount of the buybacks of their shares, starting next June 30, as long as they pass the new round of stress tests.
The amount of dividends of the largest Wall Street giants has been subjected to a limit calculated on the basis of their profits, to encourage banks to rather provide loans to the real economy, therefore to businesses and families.
The American authorities, it must be said, have been much more lenient towards the banks than the ECB, which lifted the ban on the distribution of dividends imposed on banks in the euro area only last December, still imposing strong restrictions, which they will remain in place at least until next September 30th.
The Fed, it must be said, has never imposed a stop on dividends, which the ECB did from March 2020 until, precisely, in December. However, the US central bank had imposed a halt to buybacks on the main 34 European banks (as well as the ECB).
“The banking system continues to be a source of strength and the return to normal after this year’s stress tests will preserve that strength,” said the deputy general manager of the Fed’s banking supervision division Randal Quarles.
Therefore, the protagonists in today’s session are also the shares of banks, which in recent weeks have outperformed several other sectors.
Notably, the S&P 500 financial sub-index jumped 14.7% this year, driven higher by stocks from banks like People’s United, Fifth Third and Wells Fargo. These stocks are now up, as are those of Bank of America, JP Morgan, Citigroup, Goldman Sachs.
The Fed’s announcement came after the dividend assist confirmed by US Treasury Secretary Janet Yellen, who said she was in favor of lifting previously imposed restrictions on dividends and buybacks.
“I had previously opposed – admitted Yellen – But the health conditions of financial institutions appear to be better, and I believe that banks should have some freedom, as long as the rules on the distribution of dividends allow it”.
Those banks that fail to hit the capital targets will in any case have to observe the restrictions imposed during the pandemic era until next September 30th.
Hi-tech stocks still weak, with Tesla, Apple, Amazon little moves.