The recent market rally was mainly buoyed by the U.S. Federal Reserve’s flexible average inflation targeting as well as progress on COVID-19 vaccines which would lower the risk of renewed full lockdowns, experts noted.
NEW YORK, Aug. 29 (Xinhua) — Wall Street’s major averages finished the past week on an upbeat note, with the Dow rising more than 160 points to erase its losses for the year.
The Dow Jones Industrial Average jumped 161.6 points, or 0.57 percent, to end at 28,653.87 on Friday. The S&P 500 increased 0.67 percent to 3,508.01. The Nasdaq Composite Index climbed 0.6 percent to 11,695.63.
With Friday’s gains, the Dow closed up positive for the year, erasing its coronavirus-induced losses. The index is now about 3 percent shy of its record closing high on Feb. 12. The S&P 500 and the Nasdaq both wrapped up the session at records.
For the week, the Dow rose 2.6 percent, the S&P 500 gained 3.3 percent, and the Nasdaq advanced 3.4 percent.
The S&P U.S. Listed China 50 index, which is designed to track the performance of the 50 largest Chinese companies listed on U.S. exchanges by total market cap, logged a weekly rise of 5.3 percent.
The recent market rally was mainly buoyed by the U.S. Federal Reserve’s flexible average inflation targeting as well as progress on COVID-19 vaccines which would lower the risk of renewed full lockdowns, experts noted.
A trader wearing a face covering works on the trading floor of the New York Stock Exchange in New York, the United States, on May 26, 2020. (Colin Ziemer/NYSE/Handout via Xinhua)
Fed Chairman Jerome Powell announced on Thursday that the central bank will seek to achieve inflation that averages 2 percent over time, a new strategy for carrying out monetary policy to help fight the COVID-19 pandemic and boost economic recovery.
“Therefore, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time,” Powell said in remarks to the Kansas City Fed’s annual Jackson Hole research conference, which was held virtually this year because of the pandemic.
The new approach came after the Federal Open Market Committee, the Fed’s policy-making committee, on Thursday formally approved a revamp of the central bank’s statement on longer-run goals and monetary policy strategy following a yearlong review of its monetary policy framework.
“This is a subtle change, made because the old way of conducting policy did not work,” Chris Low, chief economist at FHN Financial, said in a note on Thursday, adding the move indicated “the era of preemptive monetary policy is over.”
“The Fed’s stance means, in our view, that we can expect to see sustained low interest rates for at least a few years and possibly more asset purchases in the near to medium term,” said analysts at Zacks Investment Management.
U.S. Federal Reserve Chairman Jerome Powell testifies before the U.S. House Committee in Washington, D.C., the United States, on June 30, 2020. (Tasos Katopodis/Pool via Xinhua)
The move came as a slew of data showed challenges remain in the U.S. economic recovery.
The U.S. economy contracted at an annual rate of 31.7 percent in the second quarter amid mounting COVID-19 fallout, the U.S. Commerce Department reported Thursday.
Moreover, U.S. initial jobless claims, a rough way to measure layoffs, came in at 1 million in the week ending Aug. 22, following claims of 1.1 million in the prior week, said the Department of Labor. It’s the 22nd time in the past 23 weeks that the figure came in above 1 million.
The U.S. Bureau of Economic Analysis said on Friday that the nation’s personal consumption expenditures rose a modest 1.9 percent in July and personal income increased 0.4 percent.
U.S. Consumer Confidence Index decreased to 84.8 in August from 91.7 in July, as Americans worried about the economic outlook, New York-based The Conference Board reported on Tuesday. The reading fell short of market consensus.
“The stock market is arguably pricing-in what the economy will look like a year from now, and what the market sees is significant pent-up demand, a fading pandemic-induced economic impact, and a wall of liquidity coursing its way through capital markets,” Mitch Zacks, CEO at Zacks Investment Management, said in a note on Saturday, commenting on the seeming disconnection between market performances and the U.S. economy.
“Consumer and investor sentiment is improving in the wake of the pandemic but may sour as the election nears,” Zacks said, adding “the mixed bag on sentiment may be ok for stocks, ultimately — not too hot, not too cold.” ■
