Day Traders Diary

8/27/20

Stocks rose in volatile trading on Thursday after the Federal Reserve unveiled a new framework that could keep interest rates lower for a longer period of time. The Dow Jones Industrial Average is rising more than 150 points, or 0.6%. Thursday's gains pushed the Dow into positive territory for the year. The S&P 500 gained 0.2% and briefly topped 3,500 for the first time. The Nasdaq Composite is modestly lower.   

The major averages got a boost to start the session after Fed Chairman Jerome Powell said the central bank formally agreed to a policy of "average inflation targeting." In other words, the central bank will let inflation run "moderately" above its 2% goal for "some time."

The central bank has for years tried to keep inflation at 2%, a rate of price increase that policymakers consider both manageable and indicative of a healthy economy. But ever since the financial crisis, inflation in the U.S. has more often than not lagged the Fed's target.

Powell also hinted that unemployment data can stay lower for longer before the Fed starts thinking about raising rates. This led to a decline in short-term yields and gains in long-term yields.

Bank stocks rose broadly. Citigroup gained 1.6%. JPMorgan Chase, Bank of America and Wells Fargo were all up at least 1.8%. The benchmark 10-year rate climbed to 0.74% and the 30-year bond yield advanced to 1.493%.