This Week In Financial News 8/28: Stocks, Dow, More Inflation?
It was truly a historic week as the esteemed Dow Jones Industrial Average went through a major revamping and the Federal Reserve announced a new monetary policy. The coronavirus spread continued at a somewhat slower pace as new treatments and tests were unveiled. The economic news was mostly horrible and the stock market soared to one new high after another. Let me catch you up on the events of the week and tell you about an all in one app to simplify your personal financial life. I’m Jordan Goodman, America’s Money Answers Man and this is the Money Answers Week in Review.
The Dow Jones Industrial Average which most people think is the chief indicator of stock market moves, doesn’t get changed very often. But this week Exxon Mobil, Pfizer and Raytheon were thrown out of the Dow. They were replaced by Saleforces.com, Amgen and Honeywell. These changes will make the Dow Jones Average go much higher than it would have otherwise.
Federal Reserve chairman Jerome Powell made a milestone speech announcing that the Fed is abandoning its policy of raising interest rates pre-emptively to head off inflation. The Fed will now be willing to tolerate more inflation over its 2% target and emphasize boosting job creation instead. This move will make stocks more attractive than bonds because higher inflation tends to be good for stocks and bad for bonds. This shift in Fed policy is one reason the stock market surged to new all time highs on the NASDAQ and S&P 500.
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Coronavirus continues to run rampant across America, as there were over 41,000 new cases a day, 5.8 million total cases and over 179,000 deaths. But progress is being made on treating the virus. Abbott Labs got an emergency use authorization to distribute a rapid response antigen test kit that has 97% accuracy. The FDA also approved a convalescent plasma therapy to treat severe coronavirus cases.
Most economic numbers were dismal. The GDP fell 31.7% in the second quarter, the deepest drop in the 70 years that this number has been released. Consumer spending plummeted 34% and capital spending tumbled 26%. Unemployment claims remained at about a million. Before the pandemic hit, it was about 200,000 a week. Consumer confidence dropped to its lowest level since 2014. American Airlines says it is going to lay off 19,000 workers on October 1 if it doesn’t get more bailout money from Uncle Sam.
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