(New York) The New York Stock Exchange closed higher on Friday, delighted by the announcement of upcoming rate cuts by the chairman of the Fed, the American central bank, which Wall Street has been waiting for for many months.
The Dow Jones gained 1.14%, the NASDAQ index rose 1.47% and the broader S&P 500 index gained 1.15%.
After opening in a good position, the New York market shifted into second gear with the speech by the chairman of the Federal Reserve (Fed), Jerome Powell, at the Jackson Hole symposium, which brings together many central bankers.
“The time for monetary policy adjustment has come,” the official said.
Investors, who have repeatedly believed in imminent monetary easing over the past two years before becoming disillusioned, welcomed these more affirmative than usual remarks.
“The speech emphasized the state of the labor market and the fact that Fed members do not want to see it deteriorate further, which leaves the door open for a half-point cut” in the Fed’s key rate, said Angelo Kourkafas of Edward Jones, a favorable outlook for the stock market.
Investors still see a quarter-point cut as the most likely scenario, but they now give a half-point scenario a nearly 40% chance.
In the wake of this, bond rates plunged. The yield on 2-year US government bonds stood at 3.91%, compared to 4.00% the previous day at the close.
For Peter Boockvar of Bleakley Financial Group, the reaction of the New York Stock Exchange was contained because “the market had almost already integrated” the probable rate cut in September.
The relative restraint shown by operators is also due, according to José Torres of Intarctive Brokers, to the unexpected surge in resales of new homes in July, a movement “which is undoubtedly inflationary”, according to him.
In addition to the gains recorded on Friday, which brought the NASDAQ and S&P 500 within a breath of their closing records, Angelo Kourkafas noted the resumption of a rotation movement which is benefiting neglected values.
The neutrally weighted S&P 500, which gives each stock equal importance (while the core index takes into account market capitalizations), thus recorded a new historical high.
The Russell 2000 index, which only includes SMEs, rose more than 3% during the session.
The semiconductor sector supported the NASDAQ, recovering after a difficult session on Thursday. Nvidia (+4.65%), Broadcom (+2.48%) and Qualcomm (+2.66%) benefited from a hunt for bargains.
In general, volatile stocks were sought after, from electric vehicle maker Rivian (+8.98%) to cruise line Carnival (+7.51%) to cryptocurrency exchange Coinbase (+6.54%).
Canadian National Railway (CN) shares rose 2.49% after the Canadian government ordered the opening of arbitration proceedings between CN and the Teamsters Canada Rail Conference union to reach a company-wide agreement.
CN suspended operations in Canada on Thursday due to a lack of agreement, a blockage that threatened to disrupt the transportation of goods in North America.
Mediterranean-inspired fast food chain Cava was sent into orbit (+19.53%) after beating expectations for its second fiscal quarter and raising its annual targets.
Since its IPO in June 2023, Cava’s market capitalization has more than doubled to nearly $14 billion, and the group now has more than 300 branches.
The Moderna laboratory capitalized (+1.73%) on the marketing authorization, for those over 60, by the European Medicines Agency of its vaccine against the respiratory syncytial virus (RSV), responsible for bronchiolitis.
S&P/TSX up nearly 250 points
Canada’s main stock index rose nearly 250 points Friday while U.S. stock markets also jumped as the U.S. Federal Reserve signaled it was ready to start cutting its key interest rate.
In a highly anticipated speech, US Federal Reserve (Fed) Chairman Jerome Powell said that “the time has come” for the central bank to begin cutting its key interest rate soon.
Mr. Powell, speaking at the Fed’s annual conference in Jackson Hole, Wyoming, said inflation appeared largely under control.
“The direction of the move is clear, and the timing and pace of rate cuts will depend on incoming data, evolving outlooks and the balance of risks,” he said.
“I think it’s very, very positive,” said Adelaide Chiu, portfolio manager, vice president and head of responsible investing at NEI Investments.
The S&P/TSX composite index rose 248.61 points to 23,286.08.
The ongoing labour dispute in Canada’s rail sector did not appear to weigh on stocks on Friday, but Mme Chiu noted that the economic impact of the conflict will be felt later, depending on its duration.
The Canadian dollar was trading at 73.92 US cents compared to 73.52 US cents on Thursday.
Crude oil rose $1.82 to $74.83 a barrel and natural gas fell one cent to $2.18 per million BTU.
Gold rose $29.60 to $2,546.30 an ounce and copper gained five cents to $4.20 a pound.
The Canadian Press and the Associated Press