US close: Stocks rise on hopes Fed will press pause

After a tentative start, US stocks finished Friday’s session with decent gains after the head of the Federal Reserve failed to drop any new bombshells on the market during a much-anticipated speech.

The Dow Jones Industrial Average ended the session up 0.7% at 34,357, the S&P 500 finished 0.7% higher at 4,406, while the Nasdaq closed up 0.9% at 13,591.

In early trading, indices were searching for direction, swinging between gains and losses as they awaited comments from Fed chair Jerome Powell.

“Although inflation has moved down from its peak — a welcome development — it remains too high,” Powell said in prepared remarks for his keynote address at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming.

“We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.” The Fed's inflation target is 2%, well below the current level of 3.2%.

But he added: “We will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data.”

On the whole, the speech failed to give much near-term guidance for investors. “Powell hedged his outlook by suggesting that ‘inflation has become more responsive to labour market tightness than was the case in recent decades’,” noted analysts at TD Securities following his remarks.

“We will continue to watch incoming data (just as the Fed), but expect no further rate hikes and for the Fed to start cutting rates in March 2024,” the investment bank said.

Hawaiian Electric tanks

Shares in utility company Hawaiian Electric dropped 19% on the news that Maui County was suing for damages following the recent wildfires, saying the company failed to listen to warnings and left its power lines on, causing avoidable damage and destruction. The company, which has seen shares tanked 76% in the past month alone, announced it was suspending dividend payments to save some cash.

Nvidia retreated 2.4% after a recent surge sent its stock to a record high on Thursday, as the earlier optimism surrounding a forecast-smashing quarter from the AI computing group quickly lost steam.

Luxury department store group Nordstrom slipped 8% despite beating forecasts with its second-quarter results. Sales, however, still fell 8% on last year, as the company kept its guidance for a 4-6% full-year top-line decline.

Retail peer Gap also reported an 8% year-on-year drop in quarterly sales, but shares rose 7% as earnings rose more than expected.