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Wall Street Loses Steam as Tech Stocks Head South

Published 08/27/2020, 09:30 AM
Updated 08/27/2020, 01:16 PM
©  Reuters

© Reuters

By Geoffrey Smith 

Investing.com -- U.S. stocks lost momentum Thursday, as tech stocks led the S&P 500 and Nasdaq lower even after comments from the Federal Reserve initially ignited a rally.

Stocks jumped earlier in the day after Fed Chairman Jerome Powell laid out a change in the central bank's approach to policy-making that is likely to rule out any hike in interest rates for some years. 

But by 1:00 PM ET (1700 GMT), the Dow Jones Industrial Average was up 78 points, or 0.28%, giving up a gain of more than 250 points in the morning. The S&P 500 was flat and the Nasdaq Composite, after a series of record highs, was down 0.7%.

"“The Committee seeks to achieve inflation that averages 2% over time, and therefore judges that, following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation immediately above 2% for some time,” The Fed said in an accompanying statement. 

Analysts welcomed the move, which acknowledges the trouble the Fed has had in getting inflation up to the level that aligns best with its other goal, full employment. However, it now puts an extra onus on the central bank to achieve its goals.

 
"Simply making promises to allow future overshoots, via average inflation or price level-targeting, won't count for much without a shift in the current policy approach, so that markets can think that higher inflation is more likely," said Ian Shepherdson, chief economist with Pantheon Macroeconomics. 
 
 
Microsoft (NASDAQ:MSFT) stock hit an all-time high, rising 2.2% after CNBC reported that it could wrap up the acquisition of TikTok's U.S. operations within the next two days. 
 
Some of the biggest gainers from Powell's comments were beaten-down travel stocks who have had to borrow heavily to shore up their liquidity as the pandemic hit their cash flow. Just after trading began in the U.S., United Airlines (NASDAQ:UAL) stock was up 9.1%,  American Airlines (NASDAQ:AAL) stock was up 7.8%, and Southwest stock (NYSE:LUV) and Delta Air Lines (NYSE:DAL) stock rose just under 6%. Cruise operators also made big gain, with Norwegian Cruise Line (NYSE:NCLH) stock rising 9.2%, Royal Caribbean (NYSE:RCL) stock up 6.4%, and Carnival (NYSE:CCL) stock rising 7.6%.
 
On Wednesday, Carnival had confirmed that it would extend the suspension of some sailings through the first half of 2021, due to the pandemic.

The pandemic was also behind Abbott Laboratories 's (NYSE:ABT) 7.7% rise, after the Food and Drug Administration gave Emergency Use Authorization to its Covid-19 rapid testing kit. 

In the premarket session, stocks had barely reacted to data showing that initial jobless claims stayed stuck above 1 million for another week last week, while continuing claims fell less than hoped. The news was somewhat offset by an upward revision to - admittedly historical - second-quarter gross domestic product data. Of more immediate importance was a rise in pending home sales in July to their highest level since 2005, in fresh evidence of the housing boom triggered by the pandemic and the attendant cuts in interest rates.

Latest comments

Powell will be the most cursed person by the next generation for screwing up world economy.
US economy contraction biggest in 73 years. That is not just something. It is something very very serious!
I realize that you rabidly liberal hacks want desperately to tank this bull market, but we're all tired of the lies, liberal media just needs to pack up and go home
Keep your head wrapped in that aluminum foil man. I’m going to buy some RAI & AA shares.
Wrong again! Is this ost meant to be news? Or are you talking down the .market and the economy?
There's plenty of inflation. Just look at stock valuations! Never been higher, no matter how you slice and dice it.
You are now watching the impending demise of American economy. This short sighted decision made by Fed will in no doubt underminte the fundamentals of our economy and nation as a whole. Easy money always have led to painful consequences and history always proved right. Buckle up everyone. Big wave is coming.
he wants inflation? well, he gonna have inflation, then stagflation and depression. Hope you are sure of what your doing Jay, bc I see a lot of pain for the American people for years to come
inflation is a good way for government robbing citizens, because they can print that extra inflated.
I can’t wait until “inflation” runs hot, forcing them to choose to either to save the dollar or the markets. Fun times ahead!
I support your view
EXACTLY!Soon aftar that tensions between Usa and China will rise again!Because there’s no soil left to invade for money and natural resources.
nah. Communist China invading Africa as we speak. plenty to go.
Easy money is good for everyting virtual, but easy money means everything real is in trouble.
Not if you own anything real
if you have any other idea of how to boost the economy....
boost the economy or boost stock prices? Clearly stocks dont need any more help. However, there are millions without jobs and small business galore is now destroyed because once again our elected officials went with trickle down economics which after 40 years has created a 1920’s style wealth divide. No wonder civil unrest is growing and will continue to do so.
Easy money
This is a copy of Japanese. Japan has stay in no growth for decades. They have negative rates now.
The US has gone into a spiral disaster and is unable to get out of it.. The only thing that can happen now is.. no not burst.. IMPLODE! u know shrink to ZERO.
How is that dollar still getting higher ?
And how’s that they suddenly started to suffer more after powell’s speech ?
No. Just no. I don't like the system as it currently works, but the "stimulus" is pure psychology. It applies to equities only. Not a trace of "stimulus" in the real economy or in treasury yield curves. When the illusion is shattered the investors still in the equity market will not have a good time, rich or otherwise.
actually, that is a form of inflation, but not pmi, rahter financial asset inflation
Biden wins, market does an opposite of 2016. initial 5% pop into 70% drop
you based on that what?  the voices in your head?........during the Obama/Biden years stock markets nearly tripled, GDP grew 8 years in a roll, unemployement went from 10% to 4%........
i feel a big crash is coming. i felt it also in january. you cand check my comments. i said stay away of stocks and i was short.
No crash, just correction. We might see it as early as next week.
The next two months will be interesting. Fairly certain the Q3 bottleneck will wreck havoc with the repo markets and we will get a huge spike in the dollar with a crash in everything else.
they are in trouble and they dont know how to get out
They know bro. Just print more noney. Everybody happy lol
They aren't printing money though. QE is not and has never been inflationary.
All of this is nothing more than building a house of cards higher while a pandemic ravages our nation and economy.
dont bluff your economy. thats just a number. data still weak
and that school teacher who is asking questions to powell is asking directly for money for affine foundations instead of money given wage level or economic questions, what a shame
GBPUSD direction.???? Like is UP
Print more money, please, and give it to the people. So they can spend it on stock exchange. :)
America is great again
Riiiiight this is the biggest transfer of wealth in American history. Printing money and inflation means the indebted American public pays more for it's groceries and it's dollars are worth less to get us out of this crisis while stock market and ultra wealthy get richer. Shows how some of you have no idea what is going on
you think George Floyd being the catalyst for the BLM movement going gangbusters was by people power? Narritives are chosen to hide the real agendas. BLM does not hurt one billionaire.
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