The DOW rose yesterday after Federal Reserve Chair Jerome Powell signalled continuing support for the U.S. Economy. The index touched a record of just over 32,000 points briefly before closing at about 31,962.
The DOW (USA 30 - Wall Street) went up by 1.35% yesterday after the Fed Chair minimized the likelihood of inflation while testifying before the U.S. House of Representatives Financial Services Committee. Powell noted that the central bank’s main emphasis was on managing unemployment and that inflation would not be addressed unless it exceeded 2%. The Fed currently estimates the inflation rate at 1.3% and projects that it will remain at or below its 2% target through 2023.
This news may have caused traders to turn back to stocks after rising Treasury yields. Federal officials noted that the markets had been pricing in a better outlook for the U.S. economy, which may be appropriate given plans for increased stimulus spending. Additionally, there has been an expansion of the country’s vaccination program, and yesterday the Johnson & Johnson (JNJ) vaccine was found to be safe by the FDA, bringing a third vaccine option closer to rollout.
Nikkei Climbs Back Above the 30,000 Mark
Powell’s comments may also have had a positive effect on Asian stocks. Japan’s Nikkei 225 (Japan 225) index ended up by about 1.7% on Thursday, managing to push above 30,000. One of the rally leaders was SoftBank (9984.TY) which is reportedly nearing a deal with WeWork to purchase US$1.5 billion worth of shares from early investors in the office co-working company. If the deal goes through, WeWork may be purchased by the BowX Acquisition SPAC, setting up the company for a second attempt at an IPO.
With inflation fears being lessened by the Federal Reserve, the DOW could be primed to take off. However, it remains to be seen whether an improving economy can keep traders interested in the index or if it will back off from its current highs.