Stocks jump on Powell’s inflation plan; Walmart, Microsoft rally on TikTok deal

Wall Street rallied on Thursday, poised to tack on more gains after another record-setting session for each of the S&P 500 and Nasdaq on Wednesday, as investors took heart from Federal Reserve Chair Jerome Powell’s pledge to try and nudge inflation higher while maintaining accomodative monetary policy.

Powell unveiled a new framework of thinking for the central bank that will tolerate inflation “moderately” above its 2% target. The Fed also committed to reviewing this policy every five years. The Fed chief warned that the persistence of low inflation over the last eight years risks new economic difficulties. 

“Many find it counterintuitive that the Fed would want to push up inflation,” Powell said. But the Fed chief warned that low inflation leads to declining inflation expectations, which has the effect of “diminishing our capacity to stabilize the economy through cutting interest rates.”

Advances in tech stocks powered the broader market to its fourth straight record closing high, with the S&P 500 now tracking toward a more than 6% monthly gain in August, and the Nasdaq poised for an 8.5% advance. Both indexes set new intraday highs at the opening bell.

Each of Facebook (FB), Amazon (AMZN), Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGGOOGL) posted their highest-ever closing levels. Salesforce (CRM), fresh off a quarter of record sales and the announcement of its inclusion in the Dow Jones Industrial Average, surged 26%.

Meanwhile, both Microsoft and Walmart jumped as the battle to sell viral video app TikTok hit an inflection point. CNBC reported that the retail giant had joined in with Microsoft to buy the platform, in the wake of TikTok’s CEO resigning. A deal could close as soon as this week, CNBC reported.

On Thursday, investors received the latest dour read on the jobs market, as another 1 million Americans filed for first-time unemployment insurance benefits last week. The impact of the coronavirus pandemic continue to reverberate across the economy, with the report showing back-to-back weeks that jobless claims topped the 1 million mark, following a brief break below that level earlier in August.

“While this latest weekly count of initial claims was a little higher than the low from recent months reported a couple of weeks ago (971,000), it was one of the lowest figures reported since COVID-19 spread in the U.S., and we think that both initial and continuing claims will keep trending lower over time as the economy recovers from the virus-related shock,” noted JPMorgan Chase economist Daniel Silver.

Powell’s decisive remarks, combined with growth data showing the economy fared better than original estimates during the second quarter, gave investors a reason to buy risk-sensitive assets. They also defied Wall Street’s low expectations of a “deliberately vague” framework to bump inflation closer to their 2% target.

12:15 p.m. ET: Stocks hold gains after Jackson Hole

Benchmarks are perched near session highs after the Fed chair signals he intends to try and nudge prices higher without stoking hyperinflation — or raising rates. Wall Street is aiming for a 5th consecutive session of gains.

Here were the main moves in markets as of 12:15 p.m. ET:

  • S&P 500 (^GSPC): 3,493.65, +14.92 (+0.43%)

  • Dow (^DJI): 28,568.18, +236.26 (+0.83%)

  • Nasdaq (^IXIC): 11,691.49, +26.43( +0.23%)

  • Crude (CL=F): $43.19 per barrel, -0.20 (-0.46%)

  • Gold (GC=F): $1,935.00, -17.50 (-0.90%)

  • 10-year Treasury (^TNX): 0.6820 (-0.73%)

ING’s James Knightley wrote in a research note that Powell’s remarks, along with “the accompanying FOMC statement show a formal adoption of ‘average’ inflation targeting. Their new language gives them the flexibility to let the economy run a little hotter before contemplating raising interest rates and gives the green light to more modest yield curve steepening and dollar weakness.”

11:30 a.m. ET: Walmart rallies as company confirms interest in Microsoft-TikTok deal

In the latest case of strange corporate bedfellows, Walmart (WMT) said on Thursday it had joined in Microsoft’s bid for TikTok’s U.S. assets, confirming an earlier report by CNBC. In an emailed statement to Bloomberg, Walmart said the move could help grow its third-party online marketplace unit, along with its advertising arm, two areas of focus.

The retail giant’s stock jumped by over 3% in late morning trading, joining Microsoft in a brisk rally.

10:00 a.m. ET: Existing home sales post yet another gain, adding to bullish sentiment

Wall Street got another reason to take stocks higher as contracts to buy U.S. previously owned homes increased for a third straight month in July. The housing market continues to outperform the broader economy, which has been hammered by the COVID-19 pandemic.

The National Association of Realtors said on Thursday its Pending Home Sales Index, based on contracts signed last month, rose 5.9% to 122.1 last month. Contracts increased in all four regions last month.

The Dow has now erased all of its 2020 losses, and is just over 1,000 points shy of February’s record high at 29,568.57.

10:15 a.m. Powell warns on ‘long tail’ of jobs recovery

The Fed’s Powell said millions of U.S. workers displaced from restaurant, travel, and similar jobs will struggle to find new employment and need steady support from the government — despite “a lot of strength in the economy.”

He added:

“There is a particular part of the economy which involves getting people together and feeding them, flying them around the country, having them sleep in hotels, entertaining them,” Powell said in online remarks to the Fed’s annual economic symposium. “That part of the economy will find it very difficult to recover…That is millions of people who are going to struggle to find work. We need to stay with those people….We are looking at long tail of probably a couple of years at least.”

10:00 a.m. ET: Microsoft jumps on report TikTok deal may be imminent

The software giant’s stock (MSFT) is surging by over 3% on the day as CNBC reports that a deal to buy TikTok’s U.S. assets could come by week’s end. Overnight, the viral video platform’s CEO quit as a fight between TikTok and the Trump administration intensified.

Kevin Mayer, who will be replaced on an interim basis by Vanessa Pappas, wrote this in a note to employees:

“In recent weeks, as the political environment has sharply changed, I have done significant reflection on what the corporate structural changes will require, and what it means for the global role I signed up for. Against this backdrop, and as we expect to reach a resolution very soon, it is with a heavy heart that I wanted to let you all know that I have decided to leave the company.

“I want to be clear that this decision has nothing to do with the company, what I see for our future, or the belief I have in what we are building. Yiming understands my decision and I thank him for his support on this.As we look to the next phase of this company, there is no doubt that the future is incredibly bright.

“For our users, any potential structural changes should not affect their experience, and I strongly believe that our community will be more creative and diverse than ever. The platform will continue to provide our global community an amazing and integrated experience as it does today. Similarly, from an employee perspective, I believe that the vast majority of work will be unchanged.”

9:30 a.m. ET: Stocks pop at the open as Powell unveils inflation target

Investors appear to like what they heard in the Fed chair’s Jackson Hole remarks, as Wall Street aims for another day of gains. Both the resurgent S&P 500 and Nasdaq opened at fresh record highs, while the Dow added over 100 points.

Here were the main moves in markets as of 9:30 a.m. ET:

  • S&P 500 (^GSPC): 3,480.92, +2.19 (+0.06%)

  • Dow (^DJI): 28,484.02, +152.10 (+0.54%)

  • Nasdaq (^IXIC): 11,690.58, +25.52 (+0.22%)

  • Crude (CL=F): $42.89 per barrel, -0.50 (-1.15%)

  • Gold (GC=F): $1,959.60, +$7.10 (+0.36%)

  • 10-year Treasury (^TNX): 0.6820 (-0.73%)

8:31 a.m. ET: Q2 GDP growth revised to a -31.7% annualized drop, from -32.9% previously

Second-quarter US gross domestic product fell at an annualized rate of 31.7% in the second quarter this year, the BEA said in its second revision of US GDP. GDP fell at a 5.0% annualized rate in the first quarter this year.

“With the second estimate, private inventory investment and personal consumption expenditures (PCE) decreased less than previously estimated,” the BEA said in its statement.

Personal consumption – the biggest portion of US economic activity – was revised slightly to show a 34.1% annualized decline, up just modestly from the 34.2% decline previously reported in the advance print.

8:30 a.m. ET: Jobless claims match expectations

Another 1 million workers filed for unemployment benefits in the latest week, Labor Department data showed, which met expectations. While the numbers didn’t surprise to the upside, at least, it underscores just how weak the labor market remains — and the distance the economy has to travel to make up for staggering job losses.

Stock futures are modestly in the red, pointing to a lower opening on Wall Street as the market awaits Fed Chair Jerome Powell’s speech on the economy.

7:14 a.m. ET Thursday: Stocks point to a lower open ahead of Powell’s Jackson Hole remarks

  • S&P 500 futures (ES=F): 3,473.25, down 7 points or 0.2%

  • Dow futures (YM=F): 28,238.00, down 74 points or 0.26%

  • Nasdaq futures (NQ=F): 11,968.25, down 23 points, or 0.19%

  • Crude (CL=F): -$0.13 (-0.30%) to $43.26 a barrel

  • Gold (GC=F): +$6.80 (-0.35%) to $1,945.70 per ounce

  • 10-year Treasury (^TNX): -0.7 bps to yield 0.68%

6:03 p.m. ET Wednesday: Stock futures tick down as late trading kicks off

Here were the main moves in equity markets, as of 6:14 p.m. ET:

  • S&P 500 futures (ES=F): 3,477.25, down 3 points or 0.09%

  • Dow futures (YM=F): 28,297.00, down 15 points or 0.05%

  • Nasdaq futures (NQ=F): 11,977.75, down 13.5 points, or 0.11%

A trader laughs on the floor of the New York Stock Exchange March 24, 2009. REUTERS/Shannon Stapleton (UNITED STATES BUSINESS)

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