The market finished higher on Friday—with the Dow turning positive for 2020, thanks to solid economic data and the Federal Reserve’s new inflation policy that will keep interest rates lower for longer.
The Dow Jones Industrial Average was up 0.6%, over 150 points, on Friday, while the S&P 500 rose 0.7% and the tech-heavy Nasdaq Composite gained 0.6%.
The Dow erased its 2020 losses and turned positive for the year, after briefly doing so on Thursday: The index has now climbed nearly 57% from the market’s coronavirus low point in March.
Stocks moved higher after U.S. consumer spending rose by a moderate 1.9% in July, the third straight monthly increase, according to data from the Commerce Department.
Markets also cheered a speech from Federal Reserve chairman Jerome Powell, who on Thursday announced a “robust updating” of policy in which the Fed will allow inflation to run “moderately” above its long-running 2% goal.
Meanwhile, investors monitored the ongoing stalemate over the next coronavirus stimulus bill: House Speaker Nancy Pelosi spoke to White House chief of staff Mark Meadows for the first time in weeks on Thursday, but said that both sides remain at a “tragic impasse.”
The Trump administration has rejected Democrats’ counter proposals for a $ 2.2 trillion relief package, while Republicans are reportedly crafting a more narrow bill worth only $ 500 billion.
Stocks have continued to hit new records this week: On Thursday, the market rallied after the Federal Reserve announced a major policy shift. The central bank will allow inflation to run higher in a bid to support the economy and keep interest rates low for a longer period of time. The S&P 500 also reached a new record high for the fifth day in a row on Thursday, briefly topping 3,500 for the first time ever. All three major indexes have gained more than 2% this week.
“The Fed surprised markets by bringing forward the inflation target adjustment by a few weeks (from 9/16 to 8/27), but the really hard part is only now beginning,” says Vital Knowledge founder Adam Crisafulli. “How will the Fed convince markets of its ability to get inflation above 2% when it hasn’t been capable of hitting 2% to begin with? This ‘enforcement’ piece of the puzzle will presumably be fleshed out at the 9/16 meeting, but markets are right to be skeptical.”