Stocks rallied on Friday after Federal Reserve Chairman Jerome Powell delivered an uneventful Jackson Hole speech. Powell delivered a speech that barely differed from FOMC minutes or any of his previous press conferences. Bullish traders used the news to squeeze meme stocks higher and sent the Russell 2000 Index up 2.85 percent on the day. For the week, the Russell 2000 Index gained 5.05 percent, the Nasdaq 2.82 percent, the S&P 500 Index 1.52 percent and the Dow Jones Industrial Average 0.95 percent.
Although Powell mentioned a taper could be warranted later this year, other Fed officials were more strident in their tone. St. Louis Fed President James Bullard reiterated that a taper should start immediately and conclude by the end of the first quarter 2022. Cleveland Fed President Lorraine Mester said the taper should start now and end by mid-2022. They were joined by three other regional Fed Presidents, Esther Geroge, Eric Rosengren and Robert Kaplan, who have called for a taper to start soon. Kaplan was perhaps strongest in his comments, saying he worried the Fed’s quantitative easing policies are driving home affordability to its lowest level in history. New home sales below $200,000 accounted for less than 1 percent of all home sales last month. Notably, three of these presidents will become voting members of the FOMC next year, replacing three of the more dovish members.
SPDR Energy (XLE) bounced back from two months of weakness. It gained 7.45 percent on the week. West Texas Intermediate crude oil jumped from $62 a barrel to nearly $69 per barrel. Natural gas jumped to a new 52-week high after gaining more than 10 percent on the last two days of the week. First Trust ISE Revere Natural Gas (FCG) spiked 13.12 percent.
SPDR Financials (XLF) was another winner thanks to rising interest rates. It climbed 3.48 percent for the week. SPDR S&P Regional Bank (KRE) advanced 3.90 percent.
The flash manufacturing and services PMI slipped in August as stimulus effects faded. Final numbers will be out next week.
Existing home sales and new home sales both came in stronger than forecast in July, at an annualized pace of 5.99 million and 708,000, respectively.
Durable goods orders dipped 0.1 percent in July, better than the consensus estimate of a 0.5 percent drop.
Consumer sentiment as measured by the University of Michigan survey dipped again August, in line with expectations, as inflation reduced consumer optimism.
The U.S. Dollar Index fell 0.88 percent this week, with half the loss coming on Friday after Fed Chair Powell did not deviate from prior comments about a possible taper. iShares MSCI Emerging Markets (EEM) rallied 4.20 percent for the week. iShares MSCI EAFE (EFA) rose 1.57 percent.
Bond yields fell on Friday following Powell’s speech, but gained for the week. The 10-year treasury yield rose to 1.31 percent. High yield bonds performed well, with iShares iBoxx High Yield Corporate Bond (HYG) climbing 0.79 percent.