What’s happening: US stocks ended higher on Friday, with the 30-component Dow Jones index wiping off losses for the year to return to the pre-pandemic levels.
What happened: The US Federal Reserve announced a major shift in policy on Thursday that would allow interest rates to remain at the current low levels for longer.
Strong economic reports released on Friday also lifted investor sentiment, which helped Wall Street stocks to surge to new highs in the previous session.
Why it matters: Wall Street experienced a choppy trading session on Thursday after the Fed Chairman Jerome Powell announced plans to shift the policy of average inflation targeting, putting an end the earlier practice of policymakers increasing interest rates to hold off higher inflation levels.
Market sentiment was also driven by upbeat economic reports released on Friday, which showed US personal income improving by 0.4%, with consumer spending rising 1.9% in July. Economists had expected personal income to decline 0.4% and consumer spending to rise just 1.6% in the month.
The final reading for the University of Michigan’s consumer sentiment index also improved, rising to 74.1 in August, from a preliminary reading of 72.8 and above July’s 72.5.
The Dow Jones index surged 161.60 points to close at 28,653.87 on Friday, driven by gains in the shares of Walmart and Coca-Cola. Walmart’s stock received a fillip when the company joined Microsoft in its bid to purchase TikTok. Meanwhile, Coca-Cola announced a major restructuring plan involving the closure of operating units and the departure of 4,000 workers to maintain liquidity amid the pandemic.
The S&P 500 added 0.7% to settle at 3,508.01, while the Nasdaq 100 rose 0.6% to 11,695.63.
The Dow Jones index notched its third weekly rise in four weeks, gaining 2.6%, while the S&P 500 surged 3.3% and the tech-laden Nasdaq 100 recorded a 3.4% gain for the week. All three indices have climbed around 8% so far in August.
What to watch: With the Dow Jones index set for a major restructuring today, investors will keep an eye on news related to a smooth transition. Markets also await data on the Dallas Fed manufacturing index from the US. The Federal Reserve Bank of Dallas’s manufacturing index rose to -3.0 in July, versus a reading of -6.1 in the earlier month.
US stocks are expected to continue their strong run today, with stock futures trading higher in the European session.
Despite some slowdown in recent days, covid-19 cases in the US remain a major concern, with the total number of infections reaching almost 6 million.