Published: Mon, January 07, 2019
Health Care | By Edgar Pierce

Talk hope, Job data and dovish Fed boosts equities on Friday

Talk hope, Job data and dovish Fed boosts equities on Friday

The Dow Jones Industrial Average on Friday jumped to a fresh peak as a trio of bankers, headlined by current Chairman Jerome Powell, underscored the health of the USA economy but also expressed an attentiveness to a market that has grown fragile amid a spate of interest-rate increases.

Early Friday, the Labor Department said that USA employers added the most workers in 10 months as wage gains accelerated and labor-force participation jumped, suggesting the underlying economy is holding up amid falling stock prices. "We don't believe our issuance is an important part of the story", he said.

Speaking to economists in Atlanta on January 4, Powell raised the possibility of a pause in the Fed's interest-rate hiking campaign and an adjustment in its balance sheet reduction plans in response to the downside risks that investors perceive to the economy.

The major USA stock indexes finished sharply higher on Friday on the back of two key bullish events.

Powell had been sitting next to former Federal Reserve chairmen Janet Yellen and Ben Bernanke when he was asked about his impending meetings with the President regarding Fed policy, which the President has emphasized in the past as the number one problem with the economy.

The market bounce came after a volatile December selloff in which traders grew increasingly skeptical of the Fed's upbeat forecasts and plans to keep hiking interest rates in 2019. But some investors have anxious that that process could push long-term rates higher at a time when the economy was slowing.

The Fed chief stressed that the economy remained on track and that the job market was quite strong.

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Compared to comments he made after the Fed raised rates last month, "it's not that he's changed his message. but that he explained it more patiently and in greater detail", said Lou Brien, market strategist at DRW Trading in Chicago.

"The Fed has got a communication problem" when it comes to the balance sheet, said Wrightson ICAP LLC chief economist Lou Crandall.

The head of the Fed, once confirmed by the Senate, can only be removed "for cause", not a policy disagreement.

At the conference on Friday, Mr Powell said he has not spoken directly to Mr Trump and would not resign if asked.

He also defended his independence, saying he would not resign if requested Donald Trump asked. "Some years ago, we decided that rate policy was going to be the active policy tool and the balance sheet would be allowed to shrink gradually and predictably in the background", he said. But she said the turbulence may also stem from a different view of the economy than that shared by many Fed officials who feel confident US growth will remain on track for the next year, with labour markets still strong. But it has been gradually reversing that stance over the past year, although the balance sheet still remains above $4 trillion.

"The markets are pricing in downside risks. and they are obviously well ahead of the data, particularly if you look at this morning's labor market data", Powell said.

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