U.S. stocks climbed in early trading Friday, as data showed that spending and inflation rose in July, pointing to a pickup in American consumer activity.
The S&P 500 advanced 0.3% after the stock index closed at a record for the fifth straight day, buoyed by a speech from Federal Reserve Chairman Jerome Powell that signaled looser monetary policy for longer. The S&P 500 is on track for its biggest weekly gain in almost two months.
Mr. Powell’s comments were “a confirmation that in the near term and medium term, interest rates will likely remain lower,” said Arnab Das, global market strategist at Invesco. There’s a greater chance of economic expansion “beyond the pandemic, and that should improve expectations about corporate earnings,” he said.
The Dow Jones Industrial Average added 0.4%, while the tech-heavy Nasdaq Composite Index moved 0.6% higher. Gold rose 1.6% on the back of the Fed’s proposed policy shift, as a longer period of lower interest rates is expected to weigh on bond yields. That is likely to encourage investors to put more money into the precious metal instead, according to Invesco’s Mr. Das. Gold doesn’t offer an income, and is commonly viewed as a good hedge against inflation.
“You have the same push for gold as before, but it’s just been accentuated this week,” he said. “With the easing of monetary conditions, the opportunity cost of holding gold is going to be even lower. It makes even more sense as a portfolio hedge.”
The dollar continued to weaken. The WSJ Dollar index, which tracks the greenback against a basket of other major currencies, fell 0.7%. The yield on the 10-year Treasury bond edged down to 0.742%, from 0.744% on Thursday.
Shoppers browse in a New York store in August. Consumer spending for July increased 1.3%.
Photo: Richard B. Levine/Zuma PressConsumer spending rose by 1.9% in the month of July, according to fresh data from the Commerce Department, increasing at a slower pace than the month before. Core inflation rose by 0.3% during the month, coming below economists’ expectations.
“The overall message is that consumer spending is improving, but confidence is somewhat weaker,” said Gero Jung, chief economist at Mirabaud Asset Management. “We expect some strong data, as it’s lagged and in July there was still a $600-a-week subsidy given by the federal government. There’s still some uncertainty about whether a new stimulus package is coming forward though.”
Ahead of the opening bell in New York, shares of Ulta Beauty surged 15% after the cosmetics company reported earnings that beat analysts’ expectations and said e-commerce sales had more than tripled in the second quarter. Software provider Workday’s shares jumped 11.3% after it raised its 2021 revenue guidance. Walmart shares were up 2.3% after it said that it has partnered with Microsoft to bid for video-sharing app TikTok.
Overseas, the pan-continental Stoxx Europe 600 edged down 0.2%. New coronavirus infections continue to tick up across the region after several weeks of opening borders to summer travelers. Spain, Italy and France have all reported new infection rates at multi-month highs, according to analysts at Deutsche Bank.
Japanese stocks fell and the yen strengthened against the dollar after longstanding Prime Minister Shinzo Abe signaled his plans to quit due to his worsening health. The benchmark Nikkei 225 index briefly dropped as much as 2.6%, before paring some losses to close down 1.4%. The yen strengthened to 105.38 per dollar, from 106.57 on Thursday.
Elsewhere in Asia, China’s Shanghai Composite Index gained 1.6% and South Korea’s Kospi Composite added 0.4%.
—Xie Yu contributed to this article.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com
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August 28, 2020 at 07:57PM
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