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S&P 500, Nasdaq Close at Record Highs, Dow Positive for 2020

Stocks finish higher following Jerome Powell's comments the Federal Reserve will keep interest rates low even if inflation rises above its target levels.

The S&P 500 and the Nasdaq closed at record highs Friday and the Dow Jones Industrial Average turned positive for the year following Jerome Powell's comments that the Federal Reserve will keep interest rates low even if inflation rises above its target levels.

The S&P 500 gained 0.67% to close at 3,508.01, and the Nasdaq ended up 0.60% to 11,695.63.

The Dow finished up 161 points, or 0.57%, to 28,653.87, and has risen about 0.13% in 2020. 

Stocks in Japan closed lower Friday after Prime Minister Shinzo Abe said he would step down because of worsening health. Abe suffers from ulcerative colitis, an inflammatory bowel disease.

The S&P 500 established another closing high Thursday - its 19th of the year - after Powell, the Federal Reserve chairman, said the central bank would seek inflation that averages 2% over time and adopted a new strategy that reflects the Fed's "view that a robust job market can be sustained without causing an outbreak of inflation."

In what Powell called a "robust updating of our monetary policy framework," the changes mean the Fed essentially will keep rates near zero even if inflation tracks above the Fed’s target level of 2%.

"The bottom line here is that Mr. Powell and his colleagues have given themselves significantly more room to maintain zero rates and a swollen balance sheet over the next couple of years, as the economy recovers from the Covid shock," said Ian Shepherdson of Pantheon Macroeconomics. "After more than a decade of core inflation mostly running below target, the Fed will remain accommodative in order to bring unemployment back down even if inflation rises above the target."

Consumer spending in the U.S. rose 1.9% in July, higher than expectations, but came in lower than June's 6.2% jump. Personal incomes rose 0.4% vs. an expected decline of 0.2%.

Consumer sentiment in August rose to 74.1 from 72.5 in July. The reading, however, remains near the pandemic lows of 71.8 in April.

Coca-Cola  (KO) - Get Free Report said Friday it would offer voluntary separation packages to 4,000 employees in the U.S., Canada and Puerto Rico.

The beverage giant said it would reorganize its business amid changes in consumer preferences for the company's sugary beverages. The severance programs, Coca-Cola said, will cost about $350 million to $550 million.

Oil prices edged higher Friday after Hurricane Laura pounded the Texas and Louisiana coasts early Thursday but left far less damage to the region than expected.

West Texas Intermediate crude oil for October delivery, the new U.S. benchmark, was off 0.14% to $42.98 a barrel.