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NEW YORK, Aug 27 (Reuters) - The S&P 500 and the Dow advanced on Thursday as investors digested the U.S. Federal Reserve’s new strategy to adopt an average inflation target and restore the United States to full employment, as well as a promising development in the fight to contain the coronavirus pandemic.
Nasdaq closed narrowly lower.
The Fed’s new strategy sent Treasury yields higher, which gave a lift to interest rate-sensitive financials.
“The steepening of the yield curve is a welcome addition, particularly on a day where the market is rising,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts.
The financial sector provided the biggest boost to the S&P 500 and the Dow, pushing the former to its fifth straight record closing high and the latter within a hair’s breadth of reclaiming positive territory for the year so far.
The Dow remains more than 3% below its record high reached in February.
Declines in market-leading momentum stocks capped gains in all three major stock averages.
“There seems to be a bit of rotation with regards to the news today and how the market has responded, giving the markets a value bump,” Keator added.
Shares of Abbott Laboratories jumped after the company won U.S. approval to market a cheap, portable, rapid COVID-19 antigen test, which could be a step toward containing the pandemic that sent the U.S. economy spiraling into recession.
Economic recovery was forefront in Fed Chairman Jerome Powell’s remarks made as part of the Kansas City Fed’s virtual Jackson Hole symposium. In the speech Powell outlined the central bank’s aggressive new strategy to support the economy by lifting inflation and returning the economy to full employment.
“The statement by Powell in some regards is telegraphing a continued dovish stance for quite some time,” Keator said.
But with last week’s initial jobless claims stubbornly hovering above the 1 million mark, according to the Labor Department, a return to full employment currently appears to be a long haul.
Unofficially, the Dow Jones Industrial Average rose 161.31 points, or 0.57%, to 28,493.23, the S&P 500 gained 5.85 points, or 0.17%, to 3,484.58 and the Nasdaq Composite dropped 39.72 points, or 0.34%, to 11,625.34.
Of the 11 major sectors in the S&P 500, financials enjoyed the biggest percentage gain while communications services lagged.
Shares of Walmart Inc and Microsoft Corp rose after announcing a joint bid for TikTok’s U.S. assets.
Boeing Co closed higher after the European Union Aviation Safety Agency announced plans to begin flight tests of its grounded 737 MAX plane.
Luxury retailer Tiffany & Co advanced after reporting stronger-than-expected profit just days after delaying its $16.2 billion sale to France’s LVMH.
On the other end of the retail scale, discount stores Dollar General Corp and Dollar Tree Inc also beat quarterly profit expectations.
Cosmetics maker Coty Inc plunged after retail closures and weak demand led to a bigger-than-expected quarterly loss. (Reporting by Stephen Culp; Editing by Cynthia Osterman)
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