NEW YORK (AP) — Stocks are pushing further into record heights on Wall Street after the Federal Reserve made a major overhaul to its strategy, one that could keep interest rates lower for longer.
The central bank has been the superhero repeatedly rescuing the economy and markets from crises through the years, by slashing short-term interest rates and buying all kinds of bonds. Fed Chair Jerome Powell essentially said Thursday that it now may continue to pump aid into the economy even if inflation rises above its target level of 2%, as long as it had been weak before then.
“The era of easy money is here,” said Mike Loewengart, managing director of investment strategy at E-Trade Financial.
Treasury yields fell immediately after Powell began his highly anticipated speech, but then started bouncing up and down. The yield of the 10-year Treasury was at 0.71% in morning trading, up from 0.68% late Wednesday.
The S&P 500 also wobbled at the onset of trading but was was up 0.5% after the first half hour. It’s coming off a five-day winning streak and has returned to a record level after the immense support of the Fed helped halt its free-fall earlier this year and erase its pandemic losses. Low rates often act like steroids for stocks, allowing their prices to rise faster than corporate profits.
The Dow Jones Industrial Average was up 263 points, or 0.9%, at 28,595, as of 10 a.m. Eastern time, and the Nasdaq composite was up 0.2%.
Earlier in the morning, a separate report showed the pace of layoffs sweeping the country remains incredibly high but may be slowing. A little more than 1 million U.S. workers applied for unemployment benefits last week, which was a slight dip from the slightly more than 1.1 million the prior week.
In another report, the government also said that the economy looks like it shrank at an annual rate of 31.7% in the spring quarter. That would be the sharpest quarterly drop on record, but it’s not as bad as the Commerce Department’s earlier estimate of 32.9%.
In European stock markets, the German DAX lost 0.2%, and France’s CAC 40 slipped 0.1%. The FTSE 100 in London was virutally flat.
In Asia, Japan’s Nikkei 225 slipped 0.4%, and South Korea’s Kospi lost 1%. The Hang Seng in Hong Kong fell 0.8%, and stocks in Shanghai rose 0.6%.
Benchmark U.S. crude oil fell 0.9% to $43.02 per barrel. Brent crude, the international standard, lost 1% to $45.68 per barrel.