S&P 500, Nasdaq hit all-time highs after Fed Powell’s speech
Fed chairman' says "'substantial further progress’ test has been met for inflation"
High probability of ‘rate spike back up’ at end of year: The Bear Traps Report founder
The Bear Traps Report founder and editor Larry McDonald provides insight into market and economic trends.
U.S. stock indexes climbed to records highs after Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole symposium indicated the U.S. economy has made enough progress for the central bank to possibly being tapering its asset purchases later this year, but that rate hikes were further out on the horizon.
The Dow Jones Industrial Average rose 242 points, or 0.69%, while the S&P 500 index and the Nasdaq Composite index advanced 0.88% and 1.23%, respectively. Both the S&P and the Nasdaq closed at all-time highs. The Dow finished 171 points below its own record peak.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| I:DJI | DOW JONES AVERAGES | 44296.51 | +426.16 | +0.97% |
| SP500 | S&P 500 | 5969.34 | +20.63 | +0.35% |
| I:COMP | NASDAQ COMPOSITE INDEX | 19003.651134 | +31.23 | +0.16% |
"The pace of the recovery has exceeded expectations, with output surpassing its previous peak after only four quarters, less than half the time required following the Great Recession," Powell said. "My view is that the ‘substantial further progress’ test has been met for inflation," signaling the central could begin the tapering process in the coming months.
Still, he said COVID-19 remained a threat to the economy and that tapering will not be a signal for interest-rate liftoff.
The benchmark 10-year yield fell 3 basis points at 1.31% as traders pushed off rate-hike expectations until January. The federal funds rate had previously signaled traders were expecting a 25-basis point hike in December.
Meanwhile, economic data released Friday morning showed personal consumption expenditures prices excluding food and energy, the Fed's preferred inflation reading, jumped 3.6% year over year in July, the most in 30 years. Prices rose 0.3% on a monthly basis as the pace of gains declined for a second straight month.
In stocks, financials were in focus due to their sensitivity changes in interest rates.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| JPM | JPMORGAN CHASE & CO. | 248.55 | +3.79 | +1.55% |
| WFC | WELLS FARGO & CO. | 75.96 | +1.13 | +1.51% |
| GS | THE GOLDMAN SACHS GROUP INC. | 602.79 | +6.74 | +1.13% |
Elsewhere, Peloton Interactive Inc. reported a wider-than-expected quarterly loss as the growth experienced during the heart of the pandemic slowed. The company slashed the price of its less expensive bike by about 20%.
In other news, Peloton was subpoenaed by the U.S. Department of Justice and Department of Homeland Security over injuries caused by its products.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| PTON | PELOTON INTERACTIVE INC. | 9.54 | +0.48 | +5.30% |
Meanwhile, Gap Inc. beat on earnings and revenue and raised its full-year outlook amid strong demand from its Old Navy and Athleta brands. The improved outlook includes expected headwinds from supply-chain disruptions and inflationary pressures.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GPS | NO DATA AVAILABLE | - | - | - |
| HP | HELMERICH & PAYNE INC. | 36.07 | +1.65 | +4.78% |
HP Inc.’s quarterly revenue fell short of estimates as the PC maker struggled to meet demand due to the ongoing chip shortage.
In commodities, West Texas Intermediate crude oil spiked $1.32 to $68.74 a barrel and gold shot up $24.40 to $1,1816.60 an ounce.
Overseas markets were mixed.
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European bourses rallied across the board with Britain’s FTSE 100, Germany’s DAX 30 and France's CAC 30 gaining between 0.24% and 0.37%.
In Asia, Japan’s Nikkei 225 lost 0.36%, Hong Kong’s Hang Seng edged down 0.03% and China’s Shanghai Composite rallied 0.59%.