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Stocks - S&P 500 Closes at Record High as Powell's Dovish Tilt Triggers Rally

Published 08/24/2018, 04:14 PM
Updated 08/24/2018, 04:32 PM
© Reuters.  The S&P 500 notched a record high close on Friday.

Investing.com - The S&P 500 closed at an all-time highs Friday as Federal Reserve Chairman Jerome Powell's upbeat assessment of the economy and ongoing support for gradual rates hikes triggered a wave of buying.

The Dow Jones Industrial Average rose about 0.52%. The S&P 500 rose 0.62%, while the Nasdaq Composite rose about 0.86%.

Powell, in support of the Fed's glacial approach to tightening, underlined two risks facing the economy. He said too fast a pace of tightening could "needlessly" undermine economy growth, while too slow a pace would risk the economy overheating.

“I see the current path of gradually raising interest rates as the [Federal Open Market Committee’s] approach to taking seriously both of these risks.” Powell said in speech at Jackson Hole, Wyo.

Powell's speech put the risk of a more hawkish Fed in the rearview mirror, stoking investor appetite for risker assets like stocks and helping limit the drag from worries over President Donald Trump's legal issues and the China-U.S. trade war.

The U.S.-China trade war came to the fore this week as a meeting between the two nations on trade ended with little progress amid a further escalation in trade.

The United States imposed 25% tariffs on an additional $16 billion of Chinese goods just after midnight ET Thursday, prompting China to respond with in-kind measures against U.S. goods.

Corporate earnings, which has helped to offset trade jitters, were mixed. But that did little to weigh on the broader market.

Gap (NYSE:GPS) stock slumped 8.6% as the retailer reported a steeper-than-expected decline in same-store sales. HP (NYSE:HPQ) fell 2% despite reporting above-consensus earnings, while Splunk (NASDAQ:SPLK) notched a 14% gain after posting earnings that topped estimates.

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Rising energy stocks underpinned the move higher in the broader market, as oil prices snapped a 7-week losing streak amid signs of falling Iranian crude output.

On the New York Mercantile Exchange crude futures for October delivery gained 1.3% to settle at $68.72 a barrel.

The broader averages, meanwhile, shrugged off a weaker-than-expected core durable goods orders, as the underlying data showed capital expenditure remained solid.

The Commerce Department said on Friday core durable goods orders fell 0.2% last month, missing economists' forecast for a 0.5% rise. But non-defense ex-air orders grew 1.4%, above economists' estimates.

"The (headline number) 1.7% decline was driven by a huge dive in the always choppy aircraft component, a segment in which orders go with a long lag towards actual activity. Core capital goods (non-defense ex aircraft) saw orders up a healthy 1.4%, continuing their nice uptrend and signaling gains in business investment spending," CIBC said.

On the corporate news front, Netflix (NASDAQ:NFLX) stock rose 6.0% after SunTrust Robinson Humphrey upgraded its rating on the stock to "buy" and estimated that third-quarter subscriber growth would match or beat Wall Street estimates.

Top S&P 500 Gainers and Losers Today:

Autodesk (NASDAQ:ADSK), Advanced Micro Devices (NASDAQ:AMD) and Netflix (NASDAQ:NFLX) were among the top S&P 500 gainers for the session.

Foot Locker (NYSE:FL), Gap (NYSE:GPS) and Macy’s (NYSE:M) were among the worst S&P 500 performers of the session.

Latest comments

What a squeeze in bonds.
Maga
I love it
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