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Nasdaq, S&P 500 Close at Records on 'Dovish' Powell Take

Nasdaq and S&P 500 close at records following a dovish take on tapering from Fed Chair Jerome Powell.

The Nasdaq and S&P 500 closed at records in mixed trading Monday, extending the 52nd record close of the year for the S&P 500, as investors reacted to a dovish speech from Federal Reserve Chairman Jerome Powell while heading into a muted week for earnings and economic data releases.

The Dow Jones Industrial Average finished down 56 points, or about 0.2% to 35,399, while the S&P 500 gained 0.4% and the Nasdaq climbed 0.9%.

The Nasdaq and S&P 500 also reached intraday records.

Powell laid out the case for the slowing of the Fed's $120 billion in monthly bond purchases during his keynote address to the Kansas City Fed's annual Jackson Hole summit.

But he offered no firm timetable and repeated the central bank's view that the so-called tapering process should not be linked to future rate hike plans, which aren't likely to begin until early 2023.

He also suggested that while "significant further progress" has been met with respect to inflation, more job market gains would be needed in order to justify firing the starting gun on bond market purchases. 

"To us, this points to tapering likely beginning in November or December, though the Fed retains the option to delay it further if economic data were to soften," said Scott Ruesterholz, a portfolio manager at Insight Investment, which has over $1 trillion in assets under management. 

"Moreover, while recognizing that inflation has risen substantially, Powell detailed why the Fed expects this to prove transitory as supply chains gradually normalize and structural disinflationary forces reassert themselves," he added.

The additional monetary stimulus, alongside a forecast for third quarter earnings to grow 30% from last year to a collective $414.2 billion, gave stocks another boost Monday. Europe was testing all-time highs and Asia recorded solid gains in Shanghai and Japan.

Moderna  (MRNA) - Get Moderna, Inc. Report and Pfizer  (PFE) - Get Pfizer Inc. Report both traded lower following headline risk linked to the drugmakers' coronavirus vaccines in Asia and the Pacific region.

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Moderna slumped 3% after Japan suspended a total of 2.6 million of its vaccine doses after a second round of contaminants were discovered over the weekend.

Pfizer edged 0.3% higher following a myocarditis fatality in New Zealand linked to its comiranty COVID vaccine.

Affirm Holdings  (AFRM) - Get Affirm Holdings, Inc. Class A Report soared 47% after the "buy now, pay later" payment network company inked a deal with Amazon  (AMZN) - Get, Inc. Report

Hill-Rom Holdings  (HRC) - Get Hill-Rom Holdings, Inc. Report shares surged 9.7% on a report that Baxter International  (BAX) - Get Baxter International Inc. Report is negotiating to purchase the medical-equipment maker for about $10 billion. Baxter rose 2.7%.

Oil was also on the move, although prices were sliding into the red despite data from the Bureau of Safety and Environmental Enforcement. 

The report indicated that some 94% of Gulf oil production has been taken offline as a result of Hurricane Ida, which slammed the Louisiana coast Sunday with windspeeds of more than 150 miles per hour.

Reports of little damage to drilling and refining installations, as well as the likelihood that OPEC will agree to roll over its 400,000 barrel per day production increase when cartel leaders meet later this week in Vienna, added to the downside pressure.

WTI futures contracts for October delivery were up slightly to $69.03 per barrel while Brent contracts for the same month edged higher to $73.22 per barrel.

Friday's August employment report will highlight a tepid week for both earnings and economic data releases, with investors already looking to the start of September trading -- traditionally the worst month for stocks on Wall Street -- with the S&P 500 holding a year-to-date gain of 20%.

Alongside Friday's employment data, which could show the addition of more than 1 million new jobs last months, investors will also get updates on pending home sales today, consumer confidence Tuesday, manufacturing PMI data on Wednesday and weekly jobless claims the following day. 

In other markets, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was flat at 92.68 while benchmark 10-year Treasury note yields eased to 1.28%.