U.S. Stocks Boosted by “Dovish” Yellen, Tax Reform Speculation

U.S. equity markets closed mixed on Friday, supported by hopes of a long-awaited tax reform plan and boosted from speeches by Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi. The Dow Jones Industrial Average edged higher for its first weekly gain in the last three weeks. The S&P 500 Index posted a modest gain while the NASDAQ Composite finished slightly lower.

In the cash market, the blue chip Dow settled at 21813.67, up 30.27 or +0.14%, the benchmark S&P 500 Index closed at 2443.05, up 4.08 or +0.17% and the tech-based NASDAQ Composite ended the session at 6264.09, down 7.24 or -0.12%.

The Dow was supported by gains in Home Depot and IBM. The S&P 500 Index was boosted by the energy and telecommunications sector.

U.S. Economic News

Stocks were supported early in the session after President Donald Trump’s chief economic advisor Gary Cohn said the President will start publicly campaigning for highly-anticipated tax reform next week. Cohn told the Financial Times that Trump will begin calling for long-awaited reform next Wednesday when he visits Missouri.

The stock market rally extended later in the session after Fed Chair Yellen said the financial system is safer no that it was in the years surrounding the housing crisis, while Draghi said the global recovery is “firming up.”

In her highly anticipated speech at the Jackson Hole, Wyoming central bankers’ symposium, Yellen offered no clues about the future of monetary policy, instead focusing on the history of the financial crisis and what regulators have done in response. Yellen did not comment on the path for future rate increases.

Although there was some speculation Draghi might use the Jackson Hole podium to hint at when the European Central Bank might begin tightening monetary policy by tapering its asset purchase program, he did not comment directly on monetary policy.

In other news, U.S. Durable Goods Orders fell 6.8 percent last month. The drop was the biggest since August 2014 and followed a 6.4 percent increase in June. Core Durable Goods Orders increased 0.5%, higher than the 0.4% forecast and well-above the previously revised 0.1% gain.

Gold

Gold prices rose on Friday after U.S. Federal Reserve Chair Janet Yellen made no mention of monetary policy in her much-anticipated speech at the central bankers’ conference at Jackson Hole, Wyoming. Traders read this to mean Yellen is still concerned about weak inflation and that a rate hike later this year is not likely. This helped pressure U.S. Treasury yields and the U.S. Dollar, making dollar-denominated gold a more attractive investment.

The Euro soared to its highest level in more than two years against the U.S. Dollar after ECB President Mario Draghi did not express concern about the value of the single-currency in his speech at Jackson Hole. The weakness in the dollar helped extend the rally in gold.

Crude Oil

Crude oil prices firmed on Friday, supported by a weaker U.S. Dollar and as the U.S. petroleum industry in Texas braced for the arrival of Hurricane Harvey.

With the biggest storm to hit the U.S. mainland in more than a decade, the oil industry has begun preparations or shutdown procedures of refineries, terminals, production platforms and other infrastructure.

Gasoline futures surged after refinery production was stopped. Prices spiked to their strongest levels in four months and were the highest in two years for this time of year. Crude prices also rose, but investors were concerned about demand due to the refinery shut down.

According to government reports, a little less than 10 percent of offshore U.S. Gulf of Mexico crude output capacity and nearly 15 percent of natural gas production had been halted by midday on Thursday.

Although this is currently a short-term event, it could turn into a long-term catastrophe if there is wide-spread infrastructure damage and flooding.