Sticking to the Script

By Connor Smith  |  Thursday, September 8

Consistency. U.S. stocks rallied today even though Federal Reserve Chairman Jerome Powell gave investors even more reason to be concerned about a hawkish central bank.

The Dow Jones Industrial Average rose 0.6%, rallying from an intraday decline of 0.8% to lock in its second-straight day of gains. The S&P 500 rose 0.7%, while the Nasdaq Composite rose 0.6%.

Powell on Thursday made it clear the central bank is committed to tackling inflation and staying aggressive until it falls back to its 2% target, Barron's Megan Cassella writes. She adds:

And he noted that the Fed is now focused on acting “forthrightly” against inflation to ensure that consumers don’t come to view rapidly rising prices as the norm.

“History cautions strongly against prematurely loosening policy,” Powell said during a moderated discussion at the Cato Institute, a libertarian thinktank in Washington. “I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done.”

Powell’s remarks come just two weeks before the central bank’s next policy meeting, during which officials are widely expected to raise interest rates by three-quarters of a point for the third time this year. Investors were pricing in an 84% chance of a 75 basis point rise as of Thursday morning, after Powell had finished speaking, according to CME data.

Powell's appearance followed the European Central Bank's decision to raise interest rates by 0.75 point on Thursday.

Oanda's Edward Moya wrote that stocks were rising even after Powell stuck to a hawkish script, as Wall Street embraced the consistency in the Fed's messaging.

"Wall Street is expecting to see some pricing pressure relief with next week’s inflation report, but that shouldn’t derail the current 75 basis-point pace of tightening," Moya added.

Also on Thursday, initial jobless claims fell by 6,000 to 222,000 in the week ended Sept. 3. Moya notes that wages remain elevated, which should support the Fed's mission to tighten.

DJIA: +0.61 to 31,774.52
S&P 500: +0.66% to 4,006.18
Nasdaq: +0.60% to 11,862.13

The Hot Stock: Regeneron Pharmaceuticals +18.9%
The Biggest Loser: McCormick & Company -6.7%  

Best Sector: Financials +1.8%
Worst Sector: Consumer Staples -0.3%