Dow rallies on new Fed inflation stance
The Dow briefly went positive for the year as the Federal Reserve announced a dramatic policy shift in an attempt to get the economy back on its feet.
The Dow rallied 160 points on Thursday - just 46 points from break even for 2020. The S&P 500 rose only 5 points - still enough to set new record closing highs. The Nasdaq lost ground for the first time in six sessions.
The Federal Reserve announced that it will turn a blind eye if inflation heats up, in favor of fueling a recovery from the deepest recession since the Great Depression.
Instead of pulling the trigger on higher interest rates when inflation hits a 2 percent target, the Fed will now relax that mandate. The change in policy means rates are likely to stay low for longer.
With that in mind, investors cut back on high-flying tech stocks and snapped up sectors that will do well during an economic rebound, as pointed out by Wasif Latif, head of investments at Victory Capital Solutions.
"The Fed's announcement on the policy shift of focusing on inflation a little bit higher, healthy levels of inflation, and that should be good for assets over time. And that's why you're seeing the stock market react positively and risky assets are generally rising from that standpoint. Some of the cyclical sectors like industrials, financials and materials, they are benefiting more so than some of the technology sectors that have been working well in the past."
But the economy still has a lot of repairing to do when it comes to the American worker. New claims for jobless benefits came in at 1 million last week. Some 27 million Americans are still receiving some kind of government unemployment assistance.
On the corporate front: Abbot Labs won U.S. approval to market a cheap, portable, rapid COVID-19 antigen test. Hopes that will bring the U.S. one step closer to containing the pandemic - sent the stock surging nearly 8 percent to an all-time high.
And a plot twist in the forced sale of TikTok’s U.S. operations. Walmart is jumping in - teaming up with Microsoft in a bid for the popular app. Investors liked the idea and pushed Walmart 4-1/2 percent higher.
