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Wall Street ends higher after Powell’s speech

Monday, August 28, 2023

Today’s headlines

What’s happening: US stocks closed higher after Federal Reserve Chairman Jerome Powell indicated further rate hikes.

What happened: The S&P 500 snapped a three-week losing streak after Powell said that the US central bank may need to increase rates to contain elevated inflation.

However, one of the major indices still recorded losses last week, despite closing sharply higher on Friday.

Why it matters: At the Economic Policy Symposium at Jackson Hole, Wyoming, Fed Chair Powell said that policymakers were prepared to hike interest rates further to bring inflation back to the 2% target. He also acknowledged the easing of price pressures during his speech.

Powell also signalled that rates would remain unchanged in September while the central bank evaluates upcoming economic reports.

The news triggers more speculations of the Fed raising interest rates in November, after leaving them unchanged in September.

Upbeat earnings from some companies also supported the US equity market. Shares of The Gap gained 7.2% on Friday, after the company reported better-than-expected second-quarter earnings. Workday’s stock spiked 5.4%, after the company reported upbeat second-quarter results and raised its full-year revenue guidance.

Major US indices started trading on Friday with solid gains but remained volatile through the session. All the major sectors on the S&P 500 settled higher, with consumer discretionary, energy and information technology recording the most gains.

The Dow Jones index rose 247.48 points, or 0.73%, to close at 34,346.90, while the S&P added 0.67% to 4,405.71 on Friday. The Nasdaq 100 surged 0.85% to settle at 14,941.83.

The S&P ended a three-week losing streak, while the 30-stock Dow Jones index recorded losses for the second consecutive week. On the week, the Dow fell 0.4%, while S&P 500 gained 0.2%.

What to watch: Investors await the release of the US jobs report on Friday. The release of Dallas Fed Manufacturing Index on Monday will also remain in focus. The Federal Reserve Bank of Dallas’ general business activity index for manufacturing in Texas, which improved to -20.0 in July, is expected to decline to a reading of -21 in August.

The markets today

The Canadian dollar will be in focus today after closing lower on Friday

Context: The CAD/USD forex pair weakened to around a three-month low on Friday and recording losses for the week.

Details: Strength in the US dollar has been exerting pressure on the CAD/USD forex pair.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, moved higher on Friday following comments from Federal Reserve Chairman Jerome Powell. The index also notched gains for the sixth straight week.

A decline in prices of crude, one of Canada’s major exports, also kept the loonie in check. Crude prices recorded two consecutive weeks of losses, with rising US production negating major supply cuts by Saudi Arabia and Russia.

Economic data released by Canada did not support optimism for the loonie. Canada’s government budget surplus shrank to C$2.1 billion in June, from C$4.9 billion in the year-ago month. The figure also came in sharply lower than market estimates of C$5.3 billion. Although wholesale sales in Canada grew by 1.4% in July, this followed a steep 2.8% decline in the prior month.

Canada’s annual inflation rate accelerated more than projected in July, which fuelled prospects of the Bank of Canada announcing another interest rate hike in September.

The CAD/USD forex pair shed 0.16% to reach 1.3604 on Friday, after hitting its lowest level since May 31 of 1.3639 earlier in the session. For the week, the loonie shed around 0.4%, recording losses for the sixth straight week.

What to watch: With no major economic reports scheduled for release on Monday, traders will watch the GDP data from Canada on Friday. The Canadian economy, which expanded by 0.8% in the first quarter, is expected to grow by 0.1% in the second quarter.

Other Markets: European indices closed mixed on Friday, with the FTSE 100, DAX 40 and CAC 40 up by 0.07%, 0.07% and 0.21%, respectively, and the STOXX Europe 600 Index down by 0.04%.

The news shaping the markets

Russia launched an overnight air missile attack over the northern and central parts of Ukraine. The news sent the safe-haven US dollar index slightly higher this morning.


Australia’s retail sales rose by 0.5% in July. The figure topping market expectations of 0.3% lent support to the AUD/USD forex pair.


China’s industrial profits declined by 15.5% year-over-year to 3,943.98 billion yuan during the first seven months of the year. However, this was better than the 16.8 % decline in the previous period and sent the CNY/USD pair higher in forex trading this morning.


Taiwan’s consumer confidence index fell to 67.51 in August, from July’s 15-month high of 68.39, exerting pressure on the TWD/USD forex pair.


Brazil’s current account deficit narrowed to $3.61 billion in July, from $5.29 billion in the year-ago period. However, the BRL/USD pair declined slightly in forex trading this morning.

What else to watch today

Eurozone’s bank lending to households, bank lending to companies and M3 money supply, Brazil’s value of loans and Central Bank of Brazil focus market readout, Mexico’s balance of trade, as well as Saudi Arabia’s money supply M3 and value of loans.


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