6 December 2021

Stocks Rise After Powell Comments

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Major stock indexes rose toward fresh records Friday after Federal Reserve Chairman Jerome Powell stressed that the Fed shouldn’t overreact to a recent spike in inflation.

The S&P 500 advanced 0.8% after Mr. Powell’s highly anticipated speech at the virtual Jackson Hole conference. If current gains hold, the index would set a record and close above 4,500 points for the first time.

The technology-heavy Nasdaq Composite climbed 1.1%, also putting it on track for a record. The Dow Jones Industrial Average rose 0.7%.

Investors were monitoring Mr. Powell’s speech for clues about when the Fed might start to scale back its easy-money policies. The central bank has been conducting $120 billion in monthly asset purchases to juice the economic recovery, while holding its benchmark short-term interest rate near zero. Such policies have helped propel major stock indexes to all-time highs.

Minutes from the Fed’s late July policy gathering showed that many of the officials thought asset buying could start to slow down by the end of this year. This week, more regional Fed leaders made the case that it was time to pare back the central bank’s stimulus campaign.

Mr. Powell’s remarks on Friday didn’t provide a strong signal of when the process of tapering bond purchases is likely to begin. Still, the Fed chair spent much of his speech explaining why he is still confident that the recent inflation surge would prove temporary, and why the Fed shouldn’t rush to tighten monetary policy.

“The mood music going into Powell’s speech was ‘taper is coming, taper is coming,’ which might have led people to think he was going to make an announcement,” said Christopher Smart, chief global strategist at Barings.

Instead, Mr. Powell’s measured remarks signaled the Fed wouldn’t rush to begin tapering, prompting the market’s positive reaction, Mr. Smart added. “He reset expectations slightly towards later,” the strategist said.

In the bond market, the yield on 10-year Treasury notes fell to 1.314% after Mr. Powell’s speech, from 1.342% Thursday. Yields move in the opposite direction of bond prices.

One of the biggest risks to stock prices is the rise of the Delta variant, which threatens to delay a rebound in travel and leisure spending.

New data released by the Commerce Department on Friday showed consumer spending grew 0.3% in July, suggesting the recovery has lost momentum amid uncertainty caused by the Delta variant.

Still, stocks have been buoyant this week on hopes that strong economic growth will extend a surge in corporate profits.

All 11 sectors of the S&P 500 were in positive territory Friday, with energy stocks posting the strongest gains.

Among individual stocks, Peloton Interactive slid nearly 9%. The maker of exercise equipment said Friday that it had been subpoenaed by the federal government for information on its reporting of injuries related to its products. Peloton also said late Thursday that it expected its growth to slow.

HP fell 2.5% after the company said supply-chain difficulties had stopped it from meeting demand for computers. VMware tumbled 8.8% after revenue growth in its cloud-computing business fell short of analysts’ expectations.

Oil prices rose, extending a rebound driven by shrinking U.S. stockpiles of crude oil and gasoline as well as signs that transportation activity has picked up in Chinese cities. Futures on Brent crude added 2.2% to $71.71 a barrel.

In overseas markets, the pan-continental Stoxx Europe 600 gained 0.4%. Asian markets were mixed. China’s Shanghai Composite Index rose 0.6%, while Japan’s Nikkei 225 fell 0.4%

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