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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