In a notable trading session, US benchmark equity indexes experienced substantial gains following Federal Reserve Chair Jerome Powell's statement indicating that the "time has come" for easing monetary policy. The Nasdaq Composite saw a robust increase of 1.5%, closing at 17,877.8. The S&P 500 also showed strong performance, advancing 1.2% to finish at 5,634.6.
Meanwhile, the Dow Jones Industrial Average recorded a gain of 1.1%, settling at 41,175.1. Notably, all sectors concluded the trading day higher, with the real estate sector leading with an impressive 2% increase. For the week, the S&P 500 registered a total rise of 1.5%, while the Nasdaq grew by 1.4%.
The Dow also witnessed a commendable rise of 1.3% over the same period. Powell, speaking at the Kansas City Fed-sponsored economic symposium in Jackson Hole, Wyoming, stressed that "the time has come for policy to adjust" and remarked that the upside risks to inflation have "diminished." "The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks," Powell stated, indicating a cautious but optimistic approach towards future monetary policy adjustments. The Federal Open Market Committee has incrementally raised interest rates by 525 basis points from March 2022 to July 2023 to mitigate inflationary pressures.
However, it has maintained a steady monetary policy stance since the last meeting at the end of the previous month. Expert analysis suggests that, while Powell refrained from providing concrete guidance regarding the anticipated pace of rate cuts, a significant reduction, such as a 50-basis-point cut, does not appear to be justified at this juncture, according to insights from TD in a note to clients on Friday. Additionally, the Macquarie Group highlighted that the forthcoming employment data is expected to play a crucial role in shaping the future policy trajectory.
The brokerage noted that policymakers will likely be "sensitive" to any increase in the unemployment rate, emphasizing the importance of labor market trends moving forward. In the bond market, the US two-year yield fell by 10.3 basis points to 3.91%, while the 10-year yield dropped 6.7 basis points, closing at 3.8%.
Turning to corporate news, shares of Workday ($WDAY) surged nearly 13%, making it the top gainer on the Nasdaq. The enterprise software company, specializing in cloud applications for finance and human resources, announced that its fiscal second-quarter results exceeded market expectations and confirmed its full-year subscription revenue outlook, boosting investor confidence. Meanwhile, Warner Bros.
Discovery ($WBD) has initiated efforts to expand original programming for its TNT channel, with reports suggesting that the new content will be less costly than previous offerings. The company’s stock saw an increase of 7.3%, making it the second-best performer on the Nasdaq and a standout on the S&P 500 index. In contrast, Intuit ($INTU) faced the steepest decline on both the S&P 500 and the Nasdaq, plummeting 6.8%.
The financial technology giant issued a fiscal first-quarter financial outlook that fell short of Wall Street’s expectations, leading to investor sell-offs. In the commodities sector, West Texas Intermediate crude oil rose by 2.6%, reaching $74.91 per barrel on Friday, indicating resilient demand in a recovering economic landscape. In broader economic indicators, new home sales in the US surged by a double-digit percentage in July, despite a concurrent increase in median prices nationwide for the second consecutive month, as revealed by government data. Additionally, gold prices rose by 1.2% to $2,546.40 per troy ounce, while silver saw an increase of 2.8%, closing at $29.85 per ounce, reflecting ongoing interest in precious metals as hedge assets amidst market volatility. Overall, the market dynamics following Powell’s statements set a cautious yet hopeful tone as participants navigate through economic uncertainties and anticipate upcoming data releases. $US30 $US500 $WDAY $WBD $INTU.