Wall Street rallied on Friday, pushing the S&P 500 and the Nasdaq to record closing highs for the fourth time this week, as U.S. Federal Reserve Chairman Jerome Powell’s remarks at the Jackson Hole Symposium calmed fears over the tapering timetable and sent investors into the weekend in a buying mood. Canada’s benchmark stock index also closed the week at a record high, finishing the day up 0.69% even with the financials sector falling for the second straight session.
“I see two things happening,” said Mike Zigmont, head of research and trading at Harvest Volatility Management in New York. “I see a reflexive dip-buying validation and I see the market embracing a dovish Fed.”
Regarding the indexes’ recent string of all-time highs, including the S&P 500′s 52nd record high close so far this year, Zigmont said “The march north has been very consistent. The drawdowns are super shallow, and the recoveries are very fast.”
In his prepared remarks, Powell stopped short of providing a clearer picture regarding the timing of the central bank’s tapering of asset purchases or hiking interest rates, the key elements of its dovish monetary policy aimed at helping the economy recover from the pandemic recession.
Indeed, Powell appeared to strike a more dovish tone than other Federal Open Market Committee (FOMC) officials, including St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester, who said earlier in the day that they expect the tapering process to begin soon and wind down next year.
“The market is very happy that the Fed is pumping more liquidity into the economy every month,” Zigmont added. “The Fed is enabling asset prices to climb and the market is pleased with that.”
U.S. economic data released on Friday delivered, in large part, precisely what economists expected - a pullback in consumer spending and sentiment due to the COVID-19 Delta variant, and signs that the current wave of price spikes will not morph into long term inflation, inline with Fed assurances.
The Dow Jones Industrial Average rose 242.68 points, or 0.69%, to 35,455.8, the S&P 500 gained 39.37 points, or 0.88%, to 4,509.37 and the Nasdaq Composite added 183.69 points, or 1.23%, to 15,129.50.
Ten of the 11 major sectors of the S&P 500 advanced, with energy shares enjoying the largest percentage gain.
The S&P/TSX Composite index closed at 20,644.64, a gain of 140.49 points, or 0.69%. It rose 0.81% for the week.
The TSX energy sector powered a lot of the advances on Friday, rallying 3.06% as crude oil prices gained, and the materials sector rose 2.79%. The financials sector fell 0.22% and lost ground during a week that saw every major bank beat Street estimates on adjusted earnings. Some blamed the Liberal Party’s plans to increase banks’ corporate tax rates for the decline, though others noted financials rallied heading into the earnings season and the upbeat results were largely already priced into the market.
Chipmaker Nvidia’s shares rose 2.6% after sources said it would likely seek antitrust approval from the European Union to take over British chip designer Arm.
Workday Inc jumped 9.1% as brokerages upped their price targets after the company beat second-quarter revenue estimates.
Stay-at-home darling Peloton Interactive Inc slid 8.5% following its profit warning and its announcement it was being probed by U.S. regulators over an accident involving the safety of its treadmills.
Beijing continued its crackdown on its tech companies, threatening to curb their ability to list on U.S. exchanges.
U.S.-listed shares of Alibaba Group and Tencent Music Entertainment fell 3.5% and 1.4%, respectively, while the Invesco Golden Dragon ETF dropped 1.1%.
Advancing issues outnumbered declining ones on the NYSE by a 5.21-to-1 ratio; on Nasdaq, a 3.40-to-1 ratio favored advancers. The S&P 500 posted 60 new 52-week highs and one new low; the Nasdaq Composite recorded 132 new highs and 37 new lows. Volume on U.S. exchanges was 8.67 billion shares, compared with the 8.95 billion average over the last 20 trading days.
U.S. Treasury yields fell after Powell gave no new hints on when the U.S. central bank is likely to begin paring bond purchases.
“The market liked it, and they liked it because its part and parcel of this wait-and-see approach that Powell has adopted,” said David Petrosinelli, senior trader at InspereX in New York. “I think basically what he did is effectively push it off to later in the fourth quarter, rather than at the end of the third quarter in September.”
Benchmark 10-year U.S. notes fell to 1.310%, down from around 1.341% before Powell’s comments were released. The yields briefly reached a two-week high of 1.375% on Thursday. Canadian government bond yields also were lower Friday.
Oil prices rose 2%, posting their biggest weekly gains in over a year, as energy firms began shutting U.S. production in the Gulf of Mexico ahead of a major hurricane expected to hit early next week.
Brent futures rose $1.63, or 2.3%, to settle at $72.70 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.32, or 2.0%, to settle at $68.74.
That was the highest close for Brent since Aug. 2 and for WTI since Aug. 12.
For the week, Brent gained over 11% and WTI rose more than 10%, which was the biggest weekly percentage gains for both since June 2020.
“Energy traders are pushing crude prices higher in anticipation of disruptions in output in the Gulf of Mexico and on growing expectations OPEC+ might resist raising output given the recent Delta variant impact over crude demand,” Edward Moya, senior market analyst at OANDA, said.
Oil producers on Friday have shut-in 59% of Gulf of Mexico crude production as the ninth-named storm of the season barreled towards the key U.S. offshore oilfields, according to the Bureau of Safety and Environmental Enforcement (BSEE).
U.S. oil and gas companies raced to complete evacuations from offshore Gulf of Mexico platforms before Hurricane Ida slams into Louisiana as a major storm early next week.
Gulf of Mexico offshore wells account for 17% of U.S. crude production, while over 45% of total U.S. refining capacity lies along the Gulf Coast.
Reuters, with files from Darcy Keith of The Globe and Mail
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