Marketbites: Continued U.S. Economic Growth
Portfolio Manager Commentary:
Stocks rallied Friday as traders cheered comments from Federal Reserve Chairman Jerome Powell at the annual central bank conference in Jackson Hole, Wyoming, that point to stronger-than-expected economic growth. The S&P 500 energy, consumer discretionary and industrial sectors all rose at least 1% on Friday. Petroleum company Valero Energy and toymaker Hasbro were among the day’s biggest gainers, advancing 3.9% and 6.5%, respectively.
Optimism was fueled, in part, by Powell’s confidence in continued economic growth in the U.S., citing “especially robust” consumer spending and early signs of a recovery in the housing market. He reiterated the central bank’s commitment to pull inflation back down to its 2% goal.
“Although inflation has moved down from its peak — a welcome development — it remains too high,” Powell said in prepared remarks for his keynote address at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming. “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.” The yield on the benchmark 10-year Treasury note rose nearly 2 basis points to 4.253% after the chairman’s speech.
Chart of the Day:
Turkey’s central bank raised its key interest rate by 7.5 percentage points, a higher-than-expected increase as it attempts to correct years of easy-money policies imposed by President Recep Tayyip Erdogan, which has left Turkey with major financial imbalances. The bank said it increased its benchmark rate, the one-week repo rate, to 25% from 17.5%. It was the third consecutive rise since Erdogan installed a new team of economic leaders after winning a difficult election in May.
Thursday’s increase came after economists expressed concern that the government was acting too slowly to control inflation, which stands at 47.8%, putting the economy at risk over the long term.
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