By Gorilla Trades. Originally published at ValueWalk.
Commenting on Powell confirming the changes on how the Fed calculates its inflation target and today’s trading Gorilla Trades strategist Ken Berman said:
Q2 2020 hedge fund letters, conferences and more
Fed Is Changing The Way It Calculates Its Inflation Target
The major indices are all sporting modest gains at midday following a very active but choppy morning session. Fed Chair Jerome Powell gave a highly-anticipated speech regarding the Central Bank’s future monetary policies just before the opening bell. Mr. Powell confirmed the rumors that the Fed is changing the way it calculates its inflation target, which will allow for easier monetary policies going forward, which could providing additional support for the economy and risk assets. Despite the dovish announcements, Treasury yields and the dollar are notably higher thanks to the improving economic outlook.
In economic news, the weekly number of new jobless claims was in line with expectations at 1 million, while the number of continuing claims dropped to 14.5 million. Pending home sales increased by much more-than-expected, while the second reading of the second-quarter GDP also beat the consensus estimate. The S&P 500 and the Nasdaq are set to continue their record-breaking streak, as both benchmarks already hit new intraday all-time highs thanks to the positive economic and COVID-related headlines.
Market Wrap
Dow: 28,564, + 232 or 0.8%
S&P 500: 3,496, + 17 or 0.5%
Nasdaq: 11,698, + 33 or 0.3%
Russell 2000: 1,565 + 5 or 0.3%
Market breadth has been in line with the performance of the major indices this morning, with advancing issues outnumbering decliners by a 3-to-2 ratio on the NYSE at midday. Only 10 stocks hit new 52-week lows on the NYSE and the Nasdaq, while 78 stocks hit new 52-week highs. The major indices have been trading above their daily VWAPs (Volume-Weighted Average Price) for most of the morning session, pointing to intraday buying pressure. Cyclical issues and the Dow have been performing relatively well in early trading, with the exception of the energy sector, and while tech stocks are mixed at midday, Microsoft’s (MSFT, +3.2%) breakout gave a boost to a Nasdaq in the bullish environment. Stay tuned!
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