US close: Wall Street rises ahead of Powell's speech

dl nyse new york stock exchange wall st street city finance dow jones nasdaq sp finance dollar dollars us usa united states of america — New York Stock ExchangeSharecast photo / Josh White

Wall Street indices closed in the green on Friday, after a top Federal Reserve official hinted at a possible pause in rate hikes towards the end of the year, and ahead of Jerome Powell’s Jackson Hole speech on Friday.

The Dow Jones Industrial Average ended the session up 0.98% at 33,291.78, as the S&P 500 added 1.41% to 4,199.12, and the Nasdaq Composite was ahead 1.67% at 12,639.27.

“Equity markets have recouped some of the losses they endured earlier this week ahead of the Jackson Hole symposium, which starts today,” said Equiti Capital market analyst David Madden earlier.

“Jerome Powell, the Fed chair, will deliver his speech tomorrow and traders will be listening out for clues as to whether the bank will lift rates by 50-basis points or 75-basis points in September.

“Patrick Harker, Fed member, said he is undecided on a 0.5% or a 0.75% hike - central banker confirmed he is not in favour of hiking rates aggressively, only to bring them right back down.”

Madden said that suggested Harker would prefer a more measured approach to tackling inflation, which could be interpreted as “a little” less hawkish.

“The Nasdaq is the outperformer of the US indices, which is unusual seeing as bond yields are relatively high, the US 10-year yield is 3.08%.

“The fact yield is above 3% implies that bond traders are positioning themselves for more rate hikes, but we are not seeing a corresponding move in equities.”

In remarks to broadcaster CNBC, Philadelphia Fed president Patrick Harker said he would like to see short-term interest rates reach 3.4% and to then "sit there for a while", Dow Jones Newswires reported.

Harker's comment came as investors were waiting on a potentially key speech from Federal Reserve chairman Jerome Powell, scheduled for Friday.

A smattering of better-than-expected economic data in recent weeks meant market commentary was shifting towards expectations that in his speech, Powell would make the case that rates were likely to remain higher for longer.

There were also some observers, however, who believed that Powell would be nuanced enough so as not to spook markets.

On the economic front, the US economy shrank by less than previously estimated over the three months to June, with the Department of Commerce reporting that gross domestic product narrowed at a quarterly annualised pace of -0.6% in the second quarter, compared to initial estimates for a 0.9% drop.

An upwards revision to growth in household consumption to 1.5% from 1.0% drove Thursday's revisions.

The gap between GDP and GDI growth continued to widen, however with GDP standing 2.6% above its pre-Covid-19 level and GDI ahead by 6.4%.

“The gap between the two has never been wider,” said Michael Pearce, senior US economist at Capital Economics.

“With the benchmark revision pointing to an upward revision in payroll employment up to the first quarter, it seems more likely that GDP will be revised substantially higher rather than the GDI figures being revised down.

“But we will have to wait until the annual benchmark revision to the GDP figures, released on 29 September, to find out.”

Still on data, jobless claims in the US receded by more than expected once more last week.

According to the US Department of Labor, the number of initial unemployment claims dipped by a seasonally-adjusted 2,000 over the week ended 13 August, to reach 245,000.

Economists had pencilled in a print of 255,000.

In equities, Nvidia closed up 4.01%, reversing losses in the previous session that came after the chipmaker warned that sales in its fiscal third quarter would come in at around $5.9bn - $1.0bn below consensus.

Enterprise data and cloud technology firm NetApp jumped 7.88%, meanwhile, after investors cheered a strong set of earnings.

On the downside, Peloton Interactive crumbled 18.32% after the maker of at-home gym equipment posted a quarterly loss of $1.2bn.

Its shares had surged earlier in the week after it inked a deal to sell its exercise bikes and other gear through e-commerce behemoth Amazon.

Hometown discount giant Dollar Tree tumbled 10.22%, after it guided towards weaker-than-expected outcomes for full-year earnings per share and sales.

Reporting by Josh White at Sharecast.com. Additional reporting by Alexander Bueso.

Dow Jones - Risers

Boeing Co. (BA) $169.38 3.53%
Intel Corp. (INTC) $34.89 3.04%
Dow Chemical Co. (DOW) $55.76 2.80%
Caterpillar Inc. (CAT) $198.88 2.43%
JP Morgan Chase & Co. (JPM) $118.55 2.37%
American Express Co. (AXP) $162.23 1.95%
Nike Inc. (NKE) $113.22 1.62%
Visa Inc. (V) $209.82 1.52%
Apple Inc. (AAPL) $170.03 1.49%
Goldman Sachs Group Inc. (GS) $346.49 1.33%