Stocks at Record High After Powell Reassures Fed Won’t Rush to Raise Rates

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Key Takeaways

• Stocks close at records after Jerome Powell reaffirms the Fed could taper this year 
• The Fed’s chief says policymakers are in no hurry to tighten monetary policies 

Stocks Up Following Fed Reassurances

Stocks in the US rose broadly on Friday after Fed Chairman Jerome Powell reassured investors that the US central bank will not be rushing to raise interest rates once it begins reducing the monetary stimulus.  

Jerome Powell gave a speech at the Jackson Hole symposium which was widely anticipated as market participants had expected to hear more about Fed’s tapering framework or a possible timeline. While Mr. Powell addressed key issues, he was rather tight-lipped on timing the tapering process. 

The Fed Chair said policymakers at the Federal Reserve may start paring asset purchases before the end of the year. Furthermore, Fed officials are in no hurry to raise interest rates and will be guided by Covid-19 data and economic reports to assess the state of the economy.  

The S&P500 and the Nasdaq Composite received a fresh dose of optimism that pushed them to new all-time highs. The broader S&P500 advanced 39.37 points, or 0.88%, to a record of 4,509.37. The index marked its first close above the 4,500 thresholds.  

The Nasdaq Composite rose 183.69 points, or 1.23%, to a record close of 15,129.50. The tech-focused index was propelled by a strong move higher in big tech stocks. Shares of Facebook jumped 2.26%, while Tesla shares added 1.53%. Google parent Alphabet and Amazon gained 1.81%, and 1.01%, respectively.  

The Dow Jones Industrial Average rose 242.68 points, or 0.69%, to 35,455.80. All three stock gauges ended the week in positive territory despite a slight slip ahead of Jay Powell’s speech at the virtual Jackson Hole Conference.  

Optimism Bolsters Stocks to Record High

Mr. Powell’s speech was mostly focused on the Fed’s view on inflation. The central bank chief explained why he and the policy committee were aligned to believe that the recent surge in inflation would prove temporary.  

On that note, Jerome Powell argued the Fed should not rush to tighten monetary policies.  

The latest economic data, however, might further challenge policymakers at the central bank. Consumer spending in July rose 0.3% from a month earlier, following a 1.1% increase in June. The sharp drop, according to economists, indicated the economic recovery has stalled amid uncertainty around the Delta variant.  

In addition, core personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation which excludes food and energy prices, rose 3.6% on an annualized basis. The figure matched June’s core PCE print, which was the highest PCE figure since 1991. Thus, the Fed’s core PCE target stands at 2%.  

In the wake of Jerome Powell’s comments, US equity futures remain uplifted. As a result, futures on all three main stock indexes indicate a slightly higher open in the regular session on Monday.  

European Markets Moderately Positive

Markets in Europe today kicked off moderately to the upside after a positive market session pushed main European indexes higher on Friday. In fact, the region-wide Stoxx 600 traded slightly above 472 points early Monday, after gaining 2 points on Friday to close at 472.34.  

Bitcoin managed to notch its fifth straight week of gains on Friday. Accordingly, the leading crypto token closed the week higher by roughly $500 to $48,800. Presently, the price of bitcoin is trading below $48,000, lower by about 2% on the day.