U.S. Stocks Set To Open Higher As Traders Prepare For Years Of Low Interest Rates

The Fed Will Target Average Inflation Of 2%

Yesterday, Fed Chair Jerome Powell provided significant support to stocks as he stated that Fed would target an average inflation of 2%. This means that interest rates will stay at the bottom for years as the current inflation is below 2% while prices remain under pressure due the negative impact of coronavirus pandemic.

Low interest rates together with the unprecedented monetary stimulus are the key reasons behind the current rally. In addition, the Fed’s pledge to keep interest rates low as long as necessary puts pressure on the U.S. dollar, which is also bullish for dollar-denominated stocks.

Not surprisingly, S&P 500 futures are gaining ground during the premarket trading session as traders prepare for years of low interest rates.

Another Attempt To Negotiate The New Coronavirus Aid Package Ends With Nothing

White House Chief of Staff Mark Meadows and U.S. House Speaker Nancy Pelosi were on the phone for 25 minutes, trying to reach consensus on the new coronavirus aid package.

However, the positions of Republicans and Democrats remained too far apart so no progress was made. According to reports, Democrats are ready to decrease their coronavirus aid package to $2.2 trillion, but this is still too much for Republicans who have their own plan that is worth $1 trillion.

As both sides fail to make any progress in negotiations, the economy will not see a new stimulus package anytime soon. Failure to provide additional economic stimulus will ultimately lead to weaker economic reports, but the market will likely ignore the problems on the stimulus front as it is focused on low interest rates.

Personal Income Increased By 0.4% In July

The U.S. has just provided Personal Income and Personal Spending reports for July.

Personal Income increased by 0.4% in July compared to analyst consensus which called for a decline of 0.2%.

Personal Spending was also better than expected, growing by 1.9% compared to analyst consensus of 1.5%.

Better-than-expected Personal Income and Personal Spending reports can provide additional support to stocks.

For a look at all of today’s economic events, check out our economic calendar.