Wall Street is on track to rebound from the worst two-day tumble since President Trump’s election.
Dow futures climbed about 200 points on Wednesday morning, signaling the selloff earlier this week may turn out to be more of a blip than a more serious downturn. The Dow’s two-day loss of 2% was its worst since September 2016.
But the bounce back also shows how the markets have suddenly become a bit more turbulent. The VIX volatility index has spiked nearly 30% this week to five-month highs.
The focus on Wednesday returned to how Corporate America is minting money these days. Boeing, easily the best Dow stock since the start of 2017, soared 6% premarket after revealing record annual profits. The aerospace giant also sounded very optimistic about 2018 thanks to hefty demand for jetliners.
Another positive for Wall Street: the bond market has stopped tanking, at least for the moment. The 10-year Treasury yield, which move opposite price, receded on Wednesday after hitting 2.73% the day before for the first time in nearly four years.
Bond yields creeping higher over the past few weeks has unnerved investors, raising concern that the era of extremely low interest rates may soon be over. Significantly higher bond rates would act as a brake on the economy by increasing borrowing rates. They would also make risky stocks look less attractive compared with relatively safer bonds.
Investors may also be breathing a sigh of relief at the measured tone Trump struck during the State of the Union Address Tuesday night. The president cheered the economic gains of the past year and called on Congress to produce a bill that generates at least $1.5 trillion for new infrastructure investment.
The economic backdrop continues to look very positive. ADP said the United States created a better-than-expected 234,000 private-sector jobs in January. That could be a good sign ahead of Friday’s more closely watched government jobs report.
The question is whether the upbeat economy, booming stock market and tax cuts will force the Federal Reserve to abandon its plan to gradually raise interest rates. The Fed will offer more clues about that pivotal question in its 2 p.m. ET statement. It is Janet Yellen’s final scheduled meeting at the helm of the Fed.