Wall Street rallied to records on Friday after the head of the Federal Reserve said it’s still far from pulling interest rates off the record low that’s helped markets soar, even if it does begin dialing back its support for the economy later this year.
The S&P 500 rose 39.37, or 0.9%, to 4,509.37 to top its prior all-time high set on Wednesday, part of a widespread rally that swept up everything from bonds to gold. The Dow Jones Industrial Average climbed 242.68 points, or 0.7%, to 34,455.80, and the Nasdaq composite gained 183.69, or 1.2%, to 15,129.50.
Stocks have set record after record this year thanks in large part to the Federal Reserve’s massive efforts to prop up the economy and financial markets. But the gains had grown more tentative as the beginning of the end of the Fed’s assistance came into sight, now that the unemployment rate has dropped and inflation has picked up.
In a speech that investors have had circled for weeks, Fed Chair Jerome Powell said that the economy has met one big milestone the central bank had set to slow the $120 billion in bond purchases it’s making each month. That could mean a paring back by the end of the year of the purchases, which are meant to keep longer-term interest rates low and to juice the economy.
But Powell also cited past mistakes where policy makers made premature moves in the face of seemingly high inflation, stressing again that today’s high inflation looks to be only temporary. He also made clear that a slowing of the Fed’s bond purchases doesn’t mean a rise in short-term rates is imminent. That would require the job market and inflation to hurdle “substantially more stringent” tests.
