Stocks hit highs, bonds tumble after Powell pivot
U.S. stocks' record-breaking rally continued and bond yields surged after Jerome Powell reiterated that the Federal Reserve will remain accommodative. The dollar climbed from a two-year low.
The S&P 500 reached an all-time high for a fifth day. The Nasdaq Composite also set a record before closing in the red. The yield premium demanded by investors on long-maturity U.S. debt compared to short-term notes increased to the most in two months after Powell said the Fed will seek inflation that averages 2% over time, a step that implies allowing for periods of overshoots. The financial and real estate sectors were the biggest gainers in the S&P, with banks seen benefiting from the higher yields. The benchmark index has surged about 56% from its March lows.
"Powell was hugely dovish," said Peter Boockvar, chief investment officer for Bleakley Financial Group. "Then bonds woke up, said this guy wants higher inflation, sell!"
Abbott Laboratories jumped 8% after winning clearance for a 15-minute Covid test. Reports showed that U.S. weekly jobless claims remained above 1 million and the economy contracted slightly less than forecast in the second quarter.
"The takeaway for the real economy is that wages will be allowed to run higher which could benefit low-income households most affected by Covid-19," said Nela Richardson at Edward D Jones & Co.
A bevy of central bankers and economists also spoke at the Fed's Jackson Hole economic symposium via webcast, entirely viewable by the public for the first time.
Traders were also monitoring news of medical advancements for the coronavirus, from Moderna Inc.'s vaccine trials to the Abbott test that will be priced at just $5.
Crude oil declined as Hurricane Laura weakened while crossing over land in the refinery and LNG-rich Gulf of Mexico region. Gold retreated for the fourth time in five trading sessions.
Here are the main market moves:
Stocks
The S&P 500 Index increased 0.2% to 3,484.55 as of 4:03 p.m. EDT, hitting the highest on record with its sixth consecutive advance.
The Dow Jones industrial average advanced 0.6% to 28,492.07, the highest in about six months.
The Nasdaq Composite Index declined 0.3% to 11,625.34, the first retreat in more than a week.
The Stoxx Europe 600 Index fell 0.6% to 370.72, the biggest fall in a week.
Currencies
The Bloomberg Dollar Spot Index gained 0.2% to 1,171.71.
The euro dipped 0.1% to $1.1819.
The Japanese yen depreciated 0.6% to 106.61 per dollar, the weakest in two weeks on the largest drop in more than a week.
Bonds
The yield on two-year Treasurys increased one basis point to 0.16%, the highest in two weeks.
The yield on 10-year Treasurys climbed five basis points to 0.74%, the highest in more than 10 weeks on the largest surge in more than two weeks.
The yield on 30-year Treasurys climbed nine basis points to 1.50%, the highest in 10 weeks on the biggest surge in 12 weeks.
Germany's 10-year yield gained one basis point to -0.41%, the highest in eight weeks.
Commodities
West Texas Intermediate crude fell 0.9% to $42.99 a barrel.
Gold weakened 1.2% to $1,930.53 an ounce, the largest drop in more than a week.
Copper increased 0.6% to $3 a pound, the highest in more than a week.
