S&P500 Closes at New High After Powell’s Reassuring Comments

09 Apr 2021 · 3rd Party Analysis

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WRITTEN BY ThorFX

In Summary

  • The broad-based S&P500 climbs to a record high, propelled by tech rally
  • Jerome Powell reiterates the Fed will not change its easy-money policies

The S&P500 climbed to a new all-time on Thursday, following Jerome Powell’s participation in an online debate on the global economy hosted by the International Monetary Fund (IMF). Federal Reserve Chairman Jerome Powell said that the central bank has all the necessary tools to curb unwanted inflation, which is expected to be short-lived as the economy powers through the recession.

Against the backdrop of Mr. Powell’s comments, the broad-based S&P500 index notched another record high on Thursday, propelled by a rally in the tech sector. The 500-stock gauge edged higher 17.22 points, or 0.42%, to end at a new record of 4,097.17. Apple and Tesla each climbed by nearly 2%, while Netflix advanced 1.4%. Amazon and Google added 0.60% and 0.50%, respectively.

The other two benchmarks also moved up. The Nasdaq Composite gained a solid 1.03%, or 140.47 points, finishing at 13,829.31. The blue-chip Dow Jones Industrial Average was little changed, still in positive territory by 0.17%, or 57.31 points, closing at 33,503.57.

Providing Essential Support to the Economy

The Federal Reserve this week reiterated that it does not intend to change its current easy monetary policy until substantial further progress is made. Adding to reassurances, Chairman Powell also noted in his comments on Thursday the central bank would continue to support the economy at least until the economy recovers from the recession.

”It’s important to remember we’re not going back to the same economy,” Mr. Powell said. “This will be a different economy.” Jerome Powell also highlighted that there are now as many as 10 million workers less compared with pre-pandemic levels. He said the central bank remains committed to help the Americans for as long as it takes. “We will not forget those people and we’ll provide the economy the support that it needs until that job is done.” The help provided by the Federal Reserve refers to the bond purchases of $120bn a month and maintaining interest rates near zero.

During the virtual meeting on Thursday, Fed Chair Powell addressed inflation concerns that have been making the rounds recently. He did note that while the economy progresses, price pressures were expected to rise but not above levels that the Fed could not control.

“We would be monitoring inflation expectations very carefully. If we see them moving persistently and materially above levels we’re comfortable with, then we’d react to that.” The Federal Reserve’s latest economic outlook does not include a rise in interest rate at least until 2023. Growth projections, however, were revised to the upside along with the employment rate. Inflation is expected to rise to 2.4% this year but then fall back at 2% in 2022.

“We got a taste of what faster progress will look like with the March employment report: close to a million jobs,” Mr. Powell said during the meeting. “We want to see a string of months like that so we can begin to show progress toward our goals.”

Equity futures on Friday are trading fairly muted with Nasdaq futures in the red. S&P future and Dow futures are modestly higher.

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