The New York Stock Exchange ended the week with new records after Fed Chairman Jerome Powell pointed out that the central bank could slow its stimulus later this year but is in no rush to raise interest rates.
Wall Street is back in record highs this week amid optimism about the final approval of the Pfizer vaccine against covid 19 and a message of reassurance from the Federal Reserve (Fed) president this Friday., Jerome Powel, who has announced the beginning of the withdrawal of stimuli.
The trading floor suffered its worst five-day run since June last week due to fears of a sudden return to the Fed stimulus and repeated concerns about the Delta variety of coronavirus, Powell's speech this Friday. Has satisfied the markets.
The Dow Jones Industrial Average has gained 0.95% in the last five sessions. Selective S&P 500 1.5 ٪ and Nasdaq Composite Index 2.8.
European stocks close higher
European stocks rose on Friday after the chairman of the Federal Reserve showed no signs that the entity is going to reduce its massive stimulus program. At the same time, the Norwegian Entra boosted the real estate sector after a significant firm entered his property.
The pan-European STOXX 600 index advanced 0.4%, with mining firms gaining 1.9% and real estate firms adding 1.5%.
The day's gains helped the STOXX 600 accumulate a 0.8% weekly gain after trading stable for several days. Commodity papers had the best weekly performance after rebounding from a strong sell-off.
Entra topped the STOXX 600, climbing 4.6% after its peer. Castellum bought 11.8% of its stake from the Norwegian government pension fund.
The STOXX 600 extended its gains following Powell's comments. However, just Eat Takeaway.com, owner of GrubHub, lost 7.5% after New York City Council passed legislation to license food delivery apps and permanently limit the commissions they can charge restaurants. Just Eat was the most significant percentage decline for the STOXX 600 on Friday.
The Fed could reduce economic stimulus this year.
The economy and the labor market in the United States have recovered to the point that the Federal Reserve could begin to reduce its stimulus measures by the end of the year, estimated this Friday, the president of the institution, Jerome Powell.
The Fed could reduce its bond purchases. But the Fed chief did not come up with a precise timetable. Instead, he emphasized that there is no rush to raise the benchmark interest rate from its current levels of 0-0.25%. He argued that the agency would not react to inflationary pressures that it considers temporary.
In his highly anticipated speech at the annual central banker's symposium in Jackson Hole, Wyoming, Powell said that despite the impact of the delta variant of the coronavirus, the US economy has continued to recover and show strong job growth.
With the vaccination campaign, many businesses managed to reopen. The unemployment rate dropped to 5.4% last month, closer to its level of 3.5% before the pandemic.
For Powell, the economy still has a way to go in this section, and the delta variant of the coronavirus adds uncertainty. However, he explained that reducing bond purchases would still maintain a great deal of stimulus to the economy.
According to Powell, " although the delta variant represents short-term risks, the outlook is for continued progress towards maximum employment, " one of the Fed's objectives, as well as inflation around 2% for a prolonged period.
The recession due to the pandemic was "the shortest" and perhaps "the deepest on record," he remarked. But with millions of jobs recovered, the Fed could reduce its asset purchases from its current level of $ 120 billion a month.
When the pandemic hit the world's largest economy squarely, the Fed cut its benchmark rates to a minimum to promote credit and consumption. In addition, it began mass buying up Treasuries and federally-backed mortgage securities to inject liquidity into the financial system.
Reduced inflation fears
Powell again downplayed fears of rising inflation, noting that bottlenecks that appear in supply chains and put pressure on the index should be resolved and that wage increases do not appear to be transferred to prices.
Although high, inflation, which was 4.2% a year in July, is likely to decline as temporary pressures, such as high used car prices, ease, he said.
Powell warned that acting to respond to temporary inflationary pressures "may do more harm than good."
"An inopportune policy unnecessarily slows down hiring and other economic activities and pushes inflation below what is desired," he explained while warning that, given the need for more advances in employment, "this mistake could be particularly harmful.".