Day Traders Diary


The major averages performed well, finishing out a winning week as Federal Reserve Chairman Jerome Powell prepared the markets for the central bank to pull back on some of its monetary stimulus, saying it's likely to start tapering its $120 billion in monthly bond purchases this year. The Dow Jones Industrial Average gained 241 points, or 0.69%, to 35,454. The S&P 500 rose 0.88% or 39 points to hit a new intraday high and closed at 4,509. The Nasdaq Composite added 183 points or 1.23%, also hitting a new record during the session, closing at 15,129.

The three major stock averages closed the week in the green. The Dow finished up 0.96%, while the S&P 500 added 1.52% and the Nasdaq Composite gained 2.82%.

The 10-year Treasury yield, which ran up this week into the Powell speech, eased slightly after the Fed chief's remarks as he made clear that interest rate hikes would not immediately follow after tapering was over.

Powell also said inflation is solidly around the central bank's 2% target rate, one of the goals of the Fed's dual mandate. It has "much ground to cover" to reach its other goal of maximum employment, however, though there has "been clear progress" toward it, Powell added. The Fed has used the term "substantial further progress" as a benchmark for when it will start tightening policy.

Based on statements from other Fed officials, a tapering announcement could come as soon as the Fed's Sept. 21-22 meeting.

The financial markets' reaction Friday is a sign that the central bank has successfully prepped investors so far for a removal of its $120 billion a month in bond buying and may avoid a 'taper tantrum' like the one that rocked markets temporarily at the end of 2013. Markets seem relieved the Fed isn't planning to raise rates soon, said Michael Arone, chief investment strategist for the US SPDR Business at State Street Global Advisors.

The speech also signaled the Fed isn't nearly as nervous about prices as some in the market and Washington are, said Adam Crisafulli, founder of Vital Knowledge.

Cliff Hodge, chief investment officer for Cornerstone Wealth, noted that Powell remained firm in the Fed's view that elevated inflation is transitory, despite the Commerce Department earlier Friday reporting the largest year-over-year personal consumption expenditures increase since 1991. The PCE Index rose 4.2% in July from the same time last year and 0.4% from the previous month.

Energy stocks led the S&P, after being among the hardest hit on Thursday. Occidental Petroleum climbed nearly 7%, Cimarex Energy rose 6.5% and APA Corp rose 5.9%.

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