Stocks seem to be enjoying the best of both worlds as they are seeing signs of improving economic momentum while monetary stimulus continues to be very accommodative.
Bloomberg: U.S. stocks capped the week with fresh highs and the dollar weakened to a more than two-year low as the Federal Reserve’s new inflation approach rippled through global markets.
The benchmark S&P 500 closed at an all-time high for a sixth consecutive trading session, while the Nasdaq Composite also reached unseen levels a day after Jerome Powell signaled that the Fed will stay accommodative for longer through more tolerance toward consumer-price increases. The Dow Jones Industrial Average turned positive for the year. The Stoxx Europe 600 Index retreated as the euro strengthened against the dollar, which posted its worst daily decline in about three months against a basket of its peers. Gold advanced.
“Stocks seem to be enjoying the best of both worlds as they are seeing signs of improving economic momentum while monetary stimulus continues to be very accommodative — and more fiscal stimulus is likely on the way,” said Yousef Abbasi, global market strategist at StoneX. “Yesterday’s action by the Fed likely provides risk-assets with the assurance they need — easy money is here to stay.”
The greenback was also hurt by a surge in the yen on news that Japanese Prime Minister Shinzo Abe will resign due to health reasons. European bonds pared earlier declines after a euro-area economic-confidence measure improved.
Powell’s shift provided another tailwind for stocks globally, which are heading for a fifth week of gains as investors monitor progress on vaccine developments for the pandemic. It also helped move the U.S. yield curve to its steepest in two months.
Treasury securities mostly rebounded from Thursday’s rout, benefiting from some buying to match duration changes in benchmark indexes at month-end.
“The Fed still has the market’s back and the market is responding positively to that prospect,” said Tracie McMillion, head of global asset allocation strategy for Wells Fargo Investment Institute. “That was confirmation that yes, we are going to see these lower rates for longer.”
Elsewhere, crude oil fluctuated as Hurricane Laura weakened while crossing over land in the refinery and LNG-rich Gulf of Mexico region. Emerging-market currencies gained, with South Africa’s rand strengthening as much as 2%.
Here are the main market moves:
The S&P 500 Index rose 0.7% to 3,507.95 as of 4:01 p.m. New York time, hitting the highest on record with its seventh consecutive advance.
The Dow Jones Industrial Average increased 0.6% to 28,653.32, the highest in about six months.
The Nasdaq Composite Index gained 0.6% to 11,695.63, the highest on record.
The Stoxx Europe 600 Index decreased 0.5% to 368.80, the lowest in a week.
The Bloomberg Dollar Spot Index sank 0.9% to 1,161.61, the lowest in more than two years on the largest decrease in more than three months.
The euro jumped 0.6% to $1.1898, the strongest in more than a week on the biggest increase in a month.
The Japanese yen appreciated 1.1% to 105.36 per dollar, the strongest in more than four weeks on the largest jump in five months.
The yield on two-year Treasuries decreased two basis points to 0.13%, the lowest in more than two weeks on the biggest tumble in more than 11 weeks.
The yield on 10-year Treasuries declined two basis points to 0.73%, the first retreat in a week and the largest drop in more than a week.
The yield on 30-year Treasuries decreased less than one basis point to 1.51%, the first retreat in a week.
West Texas Intermediate crude dipped 0.1% to $42.98 a barrel.
Gold strengthened 1.8% to $1,963.79 an ounce, the highest in more than a week on the biggest increase in more than a week.
Copper increased 1.3% to $3.03 a pound, hitting the highest in more than a week with its fifth straight advance and the largest climb in more than a week.