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Dow Bounces But Jackson Hole & Plunging Sentiment Stalk US Stocks

Last Updated September 23, 2020 12:53 PM
Francois Aure
Last Updated September 23, 2020 12:53 PM

By CCN.com: The Dow Jones surged higher on Friday, bouncing over 1% in another effort by stock market bulls to buy the recent dip.

Donald Trump managed to get the Dow moving again with some typical comments about progress with China, but a weak Consumer Sentiment  reading suggests that cracks are starting to show in the US economy.

Blissful Relief for a Battered Dow Jones

Heading into the early afternoon, the Dow Jones Industrial Average had added 280.56 points, rising 1.1% to 25,859.95.

Dow Jones, Stock Market
The Dow enjoyed a relief rally on Friday as bulls regained some traction after a horrible week. | Source: Yahoo Finance

It has been a horrendous week for US stock markets after the brief inversion of the main yield curve, so it was no surprise to see a relief rally for the three major indices (Dow, Nasdaq, and S&P 500) today.

It certainly didn’t hurt global risk sentiment that Germany indicated it was prepared to deficit spend  if its economy did plunge into a recession.

With investors resigned to a prolonged trade war, the reaction of the Federal Reserve to the market volatility has never been more significant for the Dow Jones.

Will Powell Give Stock Markets What They Want at Jackson Hole?

Jerome Powell’s Fed will be data-watching, but there is a tricky crosscurrent for the FOMC to navigate when it convenes next month.

The appropriate response to collapsing sentiment jars with robust underlying inflation in the US economy.

There is a real danger of the stronger CPI readings handcuffing Powell from easing as much as he needs to counteract the damaging effects of the trade war on US business.

In line with this perspective, economists for Lloyds Bank’s “The Wire ” noted the upcoming Jackson Hole symposium as the critical even for the Dow next week.

“The further increase in trade tensions and slump in equities, have prompted hopes that the Fed’s upcoming Jackson Hole symposium (starting Friday) will see [Powell] turn more dovish. Fed Chair Powell is likely to note that he is monitoring recent developments closely and may strongly hint at the possibility of a September rate cut. But he may still disappoint markets by suggesting that a series of rate cuts is still not the most likely outcome”

Dow Jones Stocks: Apple & Walmart Lead, Chevron Tumbles

Major Dow stocks were shining green on Friday, led by an impressive display from Apple , which rose 2% as risk appetite returned – and bond yields rose. Walmart stock  also continues to enjoy a strong showing after impressive sales figures earlier this week.

Chevron was the only member of the Dow 30  in the red, losing about 1% even though the oil price was up almost 1% on the day. The weakness in CVX  may have been due to a bearish outlook for crude oil from an OPEC report  released on Friday morning.

Click here for a real-time Dow Jones Industrial Average chart.