The S&P 500 closed at a record Thursday - its 19th of the year - after Federal Reserve Chairman Jerome Powell 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 Dow Jones Industrial Average finished up 160 points, or 0.57%, to 28,492, the S&P 500 was up 0.17% to 3,484, while the Nasdaq ended down 0.34% to 11,625.
The S&P 500 and Nasdaq set intraday all-time highs Thursday.
“The maximum level of employment is a broad-based and inclusive goal,” Powell said in a virtual address at the central bank’s annual Jackson Hole symposium.
“This change reflects our appreciation for the benefits of a strong labor market, particularly for many in low- and moderate-income communities.”
"The era of easy money is here. Loosening up on target inflation ushers in a new age of low rates for the foreseeable future - which could have a heavy impact on everything from the banking sector, to the housing sector, to retail in the form of low credit card interest rates," said Mike Loewengart, managing director of investment strategy at E-Trade.
"It could be a win for investors and the market. The initial jobless claims numbers coming in slightly over a million this morning only emphasizes the massive undertaking the Fed faces with combating unemployment - a key objective of the Fed. As we move ahead, there’s no doubt that a lot rides on how we continue to recover from the pandemic. But Powell has made it clear that the [Federal Open Market Committee] is ready to deploy all of their tools and adapt to the changing economic environment."
Ahead of the market open, reports showed the number of Americans applying for first-time jobless benefits remained above 1 million again last week, and the U.S. economy in the second quarter contracted slightly less than originally estimated.
Oil prices settled Thursday down 0.8% to $43.04 a barrel after Hurricane Laura made landfall in southwestern Louisiana as a Category 4 storm. The storm has since been downgraded to a Category 2.
Hurricane Laura has forced the closure of 80% of Gulf oil production and a third of the region’s refining capacity.
The destruction to refineries could cost $5 billion, Chuck Watson, a disaster modeler with Enki Research, told Bloomberg. The storm could cause as much as $25 billion in damage and economic losses, he said.
Abbott Laboratories (ABT) - Get Abbott Laboratories Report ended up 7.9% to $111.36 a share after its $5 rapid-response Covid-19 antigen test received emergency authorization for use in the U.S. from the Food and Drug Administration.
President Donald Trump is expected to announce a $750 million deal to buy 150 million of the rapid Covid-19 tests from Abbott, a move that would substantially expand the nation’s capacity for rapid testing, The Wall Street Journal reported.
Walmart (WMT) - Get Walmart Inc. Report is joining Microsoft (MSFT) - Get Microsoft Corporation (MSFT) Report in a bid for the Chinese video application TikTok. The Bentonville, Ark., retailing giant said in a statement that it was interested in buying Tiktok. And it said that joining the Redmond, Wash., software icon on a deal would ease the concerns of regulators about the Chinese video-sharing app.
Walmart shares finished up 4.5% at $136.63 while Microsoft rose 2.5% to $226.58.