Wall Street Returns to Records After Fed Speech

NEW YORK (AP) --- Stocks are ticking higher on Wall Street Friday after the head of the Federal Reserve said it's still likely a ways away from raising interest rates, even if it does begin dialing back its support for the economy later this year.

The S&P 500 was 0.7% higher at 4,503 in midday trading and back above its all-time high of 4,496.19 set on Wednesday. The Dow Jones Industrial Average was 233 points higher, or 0.7%, at 35,446, as of 11:05 a.m. Eastern time, while the Nasdaq composite was up 1%.

Stocks have set record after record this year thanks in large part to the Federal Reserve's massive efforts to prop up the economy and financial markets. But the market's moves have become more tentative as the beginning of the end of the Fed's assistance comes into sight, now that the unemployment rate has dropped and inflation has picked up.

In a speech that investors have had circled for weeks, Fed Chair Jerome Powell said that the economy has already met one big milestone the central bank had set to slow the $120 billion in bond purchases it's making each month to boost the economy. That could mean a paring back of purchases by the end of the year.

But Powell also cited past mistakes where policy makers made premature moves in the face of seemingly high inflation, and he said that the tests are "substantially more stringent" before the Fed will raise short-term interest rates off their record low.

"We have much ground to cover to reach maximum employment," which is one of those tests, Powell said.

Stocks climbed through Powell's speech, as low interest rates can act like steroids for the market. Stocks of companies whose profits are most closely tied to the economy were making the biggest gains.

Treasury yields were lower, but only after some relatively sharp swings. Yields fell when Powell cited past instances where policy makers prematurely raised interest rates on worries about short-term bursts in inflation, saying "such a mistake could be particularly harmful" now.

That could have been seen as an indication that the Fed may keep the course on its support for the economy. But yields later recovered some of their drops after Powell said that "substantial further progress" has been made on inflation, one of the two milestones needed for the Fed to slow its bond purchases. The other, which focuses on employment, has shown progress, Powell said it had not yet been fulfilled.

The yield on the 10-year Treasury was at 1.31% after swinging from 1.35% shortly before Powell's speech began. It's down from 1.34% late Thursday.

Of course, Powell also said that the delta variant of the coronavirus is complicating things, though he still expects improvements to continue.

The faster-spreading delta variant has raised worries among shoppers, pushed vaccinated people to wear masks indoors once again and slowed some economic activity. A report on Friday showed that consumer spending in the country rose 0.3% in July from June, a sharp slowdown from the prior month's 1.1% jump, for example. That's a big deal when consumer spending is the driving force of the U.S. economy, and its growth slowed even though income growth for Americans accelerated to 1.1% last month.

The report also showed that a gauge of year-over-year inflation preferred by the Fed held steady at a high 3.6% in July, slightly higher than economists' expectations.

The delta variant has even affected the Fed directly. Friday's symposium was supposed to be held in person, before the Fed abruptly said last week that it would be an online-only event.

Producers of commodities were making big jumps as lower yields and a weakening dollar pushed up prices for oil, gold and other raw materials.

Occidental Petroleum gained 6.9% and miner Freeport-McMoRan rose 5%, for example.

Gap rose 2.3% after the retailer reported stronger sales and profit for the latest quarter than Wall Street expected. It benefited from strength in its Old Navy and other brands.

On the losing end was HP, which fell 4.6%. It reported stronger profit for the latest quarter than analysts expected, but its revenue fell short of forecasts.

Peloton Interactive tumbled 9% after the company reported a loss for its latest quarter, cut the price of its most popular product and disclosed that it's been subpoenaed by the Justice Department and the Department of Homeland Security for documents related to its reporting of injuries associated with its exercise equipment.

Stock markets overseas were mixed. In Europe, Germany's DAX and London's FTSE 100 were 0.3% higher, while France's CAC 40 was up 0.1%.

Moves were also modest in Asia. Japan's Nikkei 225 fell 0.4%, South Korea's Kospi gained 0.2% and Hong Kong's Hang Seng was virtually unchanged.