Wall Street Hits New Highs After Comments by Fed’s Powell

30 Aug 2021 · 3rd Party Analysis

Wall Street Hits New Highs After Comments by Fed’s Powell

WRITTEN BY ThorFX

In Summary

  • Stocks push to records as Jerome Powell’s comments fuel investors’ expectations
  • Futures on Monday relatively flat to moderately higher

Stocks on Wall Street surged on Friday in response to Federal Reserve Chairman Jerome Powell assuaging investors that the US central bank is carefully monitoring the progress of the economy and would be cautious when it starts the slow removal of its pandemic-induced monetary stimulus later this year.

The blue-chip S&P500 stock average surged 0.9% to a new all-time closing high of 4,509.37. The technology-driven Nasdaq Composite rallied 1.2% to a record of 14,129.50. Both equity gauges were boosted by comments from Jerome Powell at the virtual Jackson Hole summit earlier on Friday.

Mr. Powell’s speech was focused mostly on addressing the recent spike in consumer prices. Higher inflation pressures, according to the Fed Chair, were a result of one-off factors amid the swift economic reopening. Once the reopening is complete, he argued, higher prices should moderate to lower levels.

Jerome Powell also noted that one of the two goals of the US central bank, inflation at 2%, has already been met. On that point, he said the Fed is ready to reverse some of its economic support.

The second goal Fed policymakers strive to achieve is for maximum employment. While Jerome Powell highlighted the economy has seen “clear progress” toward reaching full employment, the labor market is still “a ways away” from meeting that goal.

Still, the Fed Chair reassured market participants that Fed officials will not move too hastily to tackle higher inflation pressures. Acting too aggressively, Mr. Powell stressed, could be “particularly harmful” to the US economy which is still under pressure from the effects of the pandemic and the recent surge in Delta virus cases.

Bitcoin Continues to Trade Below

Jerome Powell’s commentary on the state of the economy, inflation, and tapering was widely expected by traders and investors mostly because they hoped to hear details over the tapering plans of the Fed.

Fed officials, including Jerome Powell, have not yet given any specific timing around tapering or dialing back, the vast monetary stimulus of $120bn in monthly asset purchases. Market participants’ focus now turns to the Fed’s next policy meeting on Sept. 21-22.

Before it, economic data from the US Labor Department, to be released on Friday, will show whether the economic recovery has reached far enough to justify an earlier tapering process. The nonfarm payrolls data and unemployment report for August will be closely monitored by both Fed policymakers and money managers. Monday’s pre-market activity shows stock futures hover right above the flat line.

Overseas, the pan-continental Stoxx Europe 600 maintained its upward momentum in the early hours of the regular session. Major European indexes traded mixed, mostly swinging around unchanged levels.

Gold was slightly lower in early Monday trades after it pushed 1.5% on Friday to close the day at $1,816. Presently, the precious metal is trading at $1,815 per troy ounce.

Bitcoin slipped about 2% earlier today to levels around $47,800 per coin. The leading cryptocurrency has been trading in the range between $46,500 to $49,500 for the past week after it couldn’t hold on to the gains above $50,000 from last Monday.

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