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US stock-index futures ticked higher on Monday, leaving Wall Street’s four main equities gauges set to build on the record closing peaks that were notched up at the end of last week.
With about 30 minutes before the opening bell, S&P 500 futures rose by 0.3 per cent to 2,318.5, Dow Jones Industrial Average futures advanced by 0.3 per cent to 20,285 and Nasdaq 100 futures rose 0.2 per cent to 5,237. Meanwhile, Russell 2000 futures advanced by 0.4 per cent to 1,394.1.
The most closely-watched US stock barometers hit their first “grand slam” of the year on Friday, as the Russell 2000, which tracks small capitalisation groups, caught up to its large-cap weighted counterparts amid optimism that the Trump administration plans to roll out a business tax reform plan over the next few weeks.
Smaller companies on average face higher tax rates than their bigger, multinational brethren, meaning they are expected to benefit more from a reduction in the corporate tax rate that Donald Trump is expected to propose.
The policy optimism continued into this week as Mr Trump’s summit with Japanese Prime Minister Shinzo Abe appeared to warm relations between the two economic heavyweights after Mr Trump’s presidency got off to a rocky start on Asia policy.
“President Trump played golf with Japanese Prime Minister Shinzo Abe, with bonhomie replacing currency wars. That (and a [fourth quarter] GDP result in Japan that at 0.2% q/q came in just fractionally below market expectations) set the stage for a risk-friendly start to the week,” said Kit Juckes, a currency strategist at Societe Generale.
Investors are expected to remain fixated on Washington for the rest of the week. Federal Reserve chief Janet Yellen testifies before Congress and two important inflation reports are due out — a duo of factors that could impact Wall Street views on when the central bank will add to its December 2016 rate increase.
“The most important event this week will be Janet Yellen’s semi-annual testimony to Congress. A key issue will be how she responds to three questions on fiscal stimulus, namely: can we afford it, do we need it, and how will the Fed respond to it?” said David Kelly, chief global strategist at JPMorgan Funds.
In fixed income, Treasuries started off the week on the back foot. The 10-year yield ticked up by 3.4 basis points to 2.44 per cent, while the two-year was up by 1.6bps to 1.21 per cent. Yields move in the opposite direction of prices.