NEW YORK (Reuters) – Wall Street stocks soared while U.S. Treasury yields fell on Friday after Federal Reserve Chair Jerome Powell indicated in a closely watched speech that the U.S. central bank could begin scaling back its bond buying program by year-end.
Powell’s comments largely reaffirmed market sentiments on the pace of the Fed’s unwinding of its massive economic support package. He was noncommittal on the precise timing of the Fed’s bond tapering, unlike earlier remarks by several regional Fed presidents.
At the Fed’s annual Jackson Hole, Wyoming, conference on Friday, Powell also indicated the bank would remain cautious in raising interest rates as it tries to nurse the economy to full employment and would avoid chasing “transitory” inflation.
Following Powell’s comments, the S&P 500 and the Nasdaq hit record highs driven by stocks in technology, communications, consumer discretionary and financials. The Dow was also trading higher in early afternoon.
The yield on the benchmark 10-year U.S. Treasury note fell to 1.3121% after Powell’s remarks.
“I think markets pretty much anticipated this. The market has been making a new high every single day and week, and it needs low rates to perform,” said David Kalis, partner at Future Fund LLC in Chicago.
The MSCI world equity index, which tracks shares in 50 countries, rose 0.79%, while the pan-European STOXX 600 index gained 0.43%.
Overnight in Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.25%, capping its best week since February.
“The Fed is also aware that they can’t raise rates aggressively, and inflation does seem transitory as the economy opens up and things get back in gear,” Kalis said.
On Wall Street, the Dow Jones Industrial Average was up 0.74% at 35,473.03, the S&P 500 gained 0.90% to 4,510.06 and the Nasdaq Composite rose 1.16% to 15,119.41.
The dollar slid after the market perceived Powell’s speech to be dovish, even as he indicated tapering the Fed’s massive support to the economy could start by year’s end.
The dollar index, which measures the greenback’s performance against a basket of six major currencies, fell 0.42% to 92.662.
Gold gained more than 1% on Friday after Powell stopped short of signaling when the Fed would start withdrawing its economic support.
Spot gold was up 1.4% at $1,817.45 an ounce. U.S. gold futures rose 0.61% to $1,803.10 an ounce.
Oil prices increased nearly 2% and were on track for their biggest weekly gains in over a year as energy companies began shutting production in the U.S. Gulf of Mexico ahead of a major hurricane expected to hit early next week.
Brent futures rose 1.93% to $72.43 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 1.77% to $68.61.
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