Dow rallies and S&P 500 and Nasdaq jump to intraday records, as Powell supports taper but doesn't signal timing

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By Mark DeCambre and Jack Denton

U.S. stock indexes rose to intraday records Friday morning, after Federal Reserve Chair Jerome Powell said at the Jackson Hole central bankers’ symposium that he supported scaling back the central bank’s bond purchases this year, without signaling specific timing.

How are stock benchmarks trading?

Equity benchmarks slipped on Thursday after three Fed officials–Robert Kaplan, James Bullard, and Esther George–advocated for tapering of the central bank’s accommodative stance sometime this year. The Dow fell 192 points on Thursday to close at 35,213, while the S&P 500 declined 0.58% and the Nasdaq Composite moved 0.64% lower.

What’s driving market?

Powell, in the closely followed speech on Friday, said he advocated tapering the Fed’s purchases of $80 billion of Treasurys and $40 billion of mortgage-backed securities each month but was vague about the timetable for such an effort.

The Fed chair said the U.S. central bank “will be carefully assessing incoming data and the evolving risks,” perhaps offering himself more wiggle room before the Fed’s Sept. 21-22 meeting to digest further evidence of the health of the economy, including a coming jobs reports for August.

The tapering question is a significant one for market participants because the monthly asset purchases have added critical liquidity to markets since the economy plunged into recession last year during the coronavirus pandemic.

Analysts had increasingly expected Powell’s speech to lack fireworks, but investors appeared to cheer the tone of the Fed chairman’s remarks.

Powell’s remarks come after a reading of the U.S. rate of inflation, based on the personal consumption deflator, rose again in July and drove the increase over the past year to a 30-year high, pointing to fresh strains on businesses and consumers as the economy recovers from the pandemic.

The so-called PCE price index, or personal-consumption expenditures, the Fed’s preferred measure of inflation, climbed 0.4% in July, government figures show. It was the fifth big increase in a row and the 12-month increase in PCE to 4.2% from 4%, was the highest since 1991. However, the core rate, excluding food and energy prices, over the past 12 months was unchanged at 3.6%, keeping it at a 30-year high.

In other data, personal incomes climbed 1.1% in July, while spending increased 0.3% in July; and the U.S. international trade deficit in goods dropped 6.2% in July to $86.4 billion.

Meanwhile, the University of Michigan’s consumer-sentiment index slipped to 70.3, versus the 70.7 expected and below the 81.2 earlier reading, indicating waning consumer optimism amid the spread of the coronavirus delta variant.

-Mark DeCambre

Which companies are in focus?

How are other assets trading?

 

(END) Dow Jones Newswires

08-27-21 1035ET

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