Stocks were up modestly Friday, with the Dow Jones Industrial Average erasing its 2020 losses and the S&P 500 index on track for another record close, as investors sifted through data on U.S. consumer spending and confidence a day after the Federal Reserve announced a policy shift that would allow employment and inflation run hotter than in the past.

What are major benchmarks doing?

The Dow DJIA, +0.44% was up 93 points, or 0.3%, at 28,586, while the S&P 500 SPX, +0.34% rose 11 points, or 0.3%, to 3,495. The Nasdaq Composite COMP, +0.33% COMP, +0.33% advanced 47 points, or 0.4% to 11,673. 

On Thursday, the Dow rose 160.35 points, or 0.6%, to close at 28,492.27. The S&P 500 ended with a gain of 5.82 points, or 0.2%, at 3,484.55, a record close. The Nasdaq , which closed at a record on Wednesday, fell 39.72 points, or 0.3%, to close at 11,625.34.

What’s driving the market?

The Dow was heading for its third weekly gain in four weeks Friday afternoon, led by both Intel INTC, +1.92% and Walmart WMT, +2.81% , ahead of a restructuring of the index come Monday.

Stocks put in a choppy performance Thursday after Federal Reserve Chairman Jerome Powell announced, in an appearance at the annual Jackson Hole monetary symposium, that the Fed was shifting to a policy of average inflation targeting which would effectively see policy makers end the practice of preemptively hiking interest rates to stave off inflation.

Need to Know:The Fed might never hike rates again. Here are growth stocks for the long run, according to one strategist

“By any metric, valuations are in nosebleed territory but there is this entrenched view that the Fed has your back, that the polls are wrong and there will be a Trump sweep, and that a vaccine is coming this fall,” said David Rosenberg, a long-time strategist now running his own firm, Rosenberg Research. “These are hardened views in the marketplace. That’s what’s triggering this ongoing rally in risk equities.”

Reflationary moves in the market, including the steepening of the yield curve and jump in bond yields to a roughly two-month high, is “likely temporary, but may still have more room to run near-term,” Rosenberg said in an interview with MarketWatch.

The Fed’s new stance might as well be “an overt attempt to steepen the yield curve to help out the bank stocks,” Rosenberg noted. “They have helped out everyone else – the growth stocks, the credit markets, everything except the value trade, which needs the steeper yield curve. They’ve made no bones about the fact that they want to stimulate financial conditions. I’m not bullish on the economy going into the fourth quarter, and I don’t think the Fed is going to be successful in generating sustainable inflation any more than they have over the past 12 years. But I do think it’s a great buying opportunity for Treasurys.”

See:‘The stock market no longer thinks it needs the economy if it has the Fed,’ David Rosenberg says

Cleveland Federal Reserve President Loretta Mester, in a television interview Friday, said the economic recovery from the pandemic-induced recession “is likely to be a slow one.” “There is more pain out there that we are going to have to support the economy through,” Mester said.

Data showed U.S. personal income rose 0.4% in July, while consumer spending was up 1.9%. Economists surveyed by MarketWatch expect had expected income to fall another 0.4% after a 1.1% drop in June. Spending was expected to show a 1.6% rise after a 5.6% increase in June.

Spending on durable goods is up 12.2%, while spending on services is down 9.3% for a net shortfall of 4.6% in total consumer demand, said Aneta Markowska, chief financial economist at Jefferies, adding that the variation in spending patterns explains “part of the disconnect between the stock market and the economy, since the former has much less exposure to the service sector than the latter.”

Read:Stop saying ‘stocks are not the economy’

The final reading of the University of Michigan’s August consumer sentiment index came in at 74.1 versus a preliminary reading of 72.8 and up from 72.5 in July.

Which companies are in focus?
What are other markets doing?

The Shanghai Composite SHCOMP, +1.60% rose 1.6% and the Hong Kong’s Hang Seng Index HSI, +0.55% gained 0.6%. 

The Stoxx Europe 600 SXXP, -0.51% closed at 368.80, down 0.5%, while U.K.’s FTSE 100 benchmark UKX, -0.57% lost 0.6% to close at 66.32. 

The yield on the 10-year Treasury note TMUBMUSD10Y, 0.741% TMUBMUSD10Y, 0.741% was down 2 basis points at 0.737%. Bond prices move inversely to yields.

Gold futures GCZ20, +2.06% rose $42.30, or 2.2%, to settle at $1,974.90 an ounce.

The ICE U.S. Dollar Index DXY, -0.67%, which tracks the currency versus a basket of six major rivals, slumped 0.6%.

Read:There will be no V-shaped recovery for consumer sentiment, DataTrek says

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like

Buffett’s Kraft-Heinz investment takes another blow – Fox Business

Huntington Private Bank CIO John Augustine discusses what Berkshire Hathaway CEO Warren…

FDA reports 1st drug shortage due to novel coronavirus outbreak – ABC News

Countries around the world are scrambling to respond to the influx of…

SEC Karate-Chops Steven Seagal Over Promoting Cryptocurrency Touted as the Next Gen Bitcoin – Bitcoin News

The U.S. Securities and Exchange Commission (SEC) has charged actor Steven Seagal…