by Xinhua writer Wang Wen
NEW YORK, May 23 (Xinhua) -- U.S. equities may still end the year in green territory, despite recent ups and downs led by trade tensions as well as Fed rate hike speculations, analysts said on Wednesday.
On Monday, U.S. stocks closed sharply higher with the Dow back above 25,000 for the first time in two months, as blue chip stocks rallied on eased trade tensions between China and the United States.
China and the United States issued a joint statement Saturday on economic and trade consultations, vowing not to launch a trade war against each other.
Analysts said the statement offered investors some relief over concerns about trade tensions between the world's two biggest economies.
On Wednesday, the stocks opened lower after retail giant Target reported earnings that missed expectations.
While worries about trade and rising protectionism have weighed on equity markets since the late-January peak, more recent gyrations are fueled by a number of other factors, analysts said.
"Trade is one among a number of factors that can swing investor sentiment, no longer the dominant issue," said Humberto Garcia, head of Global Asset Allocation for Bank Leumi USA.
The three major indices reversed losses at the end of the session on Wednesday, finishing up after the Federal Reserve's minutes released on the day showed willingness to let inflation run above the target temporarily.
Recent inflation development gave Fed officials confidence that the inflation will move up to its 2 percent target.
The price index for personal consumption expenditure (PCE), an inflation gauge preferred by the Fed, rose 2 percent from a year ago in March, the biggest increase since February 2017 and meeting the Fed's 2-percent inflation target.
Excluding the volatile food and energy prices, the core PCE price index rose 1.9 percent in March, also the largest increase since February 2017.
"Most participants viewed the recent firming in inflation as providing some reassurance that inflation was on a trajectory to achieve the (Federal Open Market) Committee's symmetric 2 percent objective on a sustained basis," said the minutes for the Fed's policy meeting on May 1 and 2.
The Fed officials said specifically that a temporary period of inflation modestly above 2 percent would be consistent with the inflation objective.
The somewhat dovish statement has led some investors to think there is less possibility for the central bank to raise rates four times this year.
Market expectations for four Fed rate hikes this year declined to 39.2 percent on Wednesday from 52.3 percent earlier this week, according to the CME Group's FedWatch tool.
"We see a 0.25 percent Fed rate hike in June and at least one more 0.25 percent hike this year. The Fed wants to create a sufficient buffer between the Fed Funds rate and zero in order to allow for stimulative maneuverability in case of economic downturn," said Garcia, who did not rule out the possibility of an acceleration in rate hikes.
He added that as the Fed continues its unprecedented effort to reduce its balance sheet at the same time that it hikes interest rates, some data such as hourly wages are stubbornly resistant to the expected upward pressure from a sub-4 percent unemployment rate not seen since the height of the dot-com boom.
Analysts also noted the performance of other economies around the world.
Sharply positive confidence surveys and manufacturing data in 2017 have now rolled over while the globally coordinated monetary accommodation that led to broadly distributed economic growth has begun to slow down, said Garcia.
