Stocks ended slightly higher on Friday, as the Nasdaq bounced back from a two-day slump driven by Apple’s woes, after Federal Reserve officials hinted that they could delay raising interest rates at their meeting in September.
Fed Officials Signal Rate Pause
Investors were encouraged by comments from several Fed policymakers that suggested they could hold off from further tightening monetary policy this year, amid signs of slowing economic growth and persistent inflation pressures.
Federal Reserve Bank of New York President John Williams said on Thursday that US monetary policy is “in a good place,” though he stressed that officials would be guided by economic data. He also said that the Fed’s bond-buying program, which has been supporting the financial markets, could end by mid-2023.
Federal Reserve Bank of Dallas President Robert Kaplan, who has been one of the most vocal advocates for tapering the Fed’s stimulus, also softened his tone on Friday, saying that he would reconsider his views if the Delta variant of the coronavirus continues to hamper the recovery.
The market interpreted these remarks as a sign that the Fed could postpone its decision on raising interest rates, which are currently near zero, until later this year or early 2023. Higher interest rates tend to weigh on stock prices, as they increase borrowing costs and reduce future earnings.
Apple Rebounds After China Crackdown
The Nasdaq Composite, which is heavily weighted with technology stocks, recovered from a sharp drop on Thursday, when it fell 1.3% as Apple shares plunged 6.7%. The iPhone maker was hit by reports that China had imposed restrictions on the use of its products by government officials and state-owned companies, amid rising tensions between Washington and Beijing.
Apple shares regained some ground on Friday, rising 0.4%, but still ended the week with a 6% loss. The stock has been under pressure recently, as investors worry about the impact of supply chain disruptions and legal challenges on its sales and profits.
Apple is expected to unveil its new iPhone model next week, which could boost its performance in the coming months. However, some analysts have lowered their ratings and price targets for the stock, citing increased competition from rivals such as Samsung, which has launched its new Galaxy foldable smartphones.
Energy Prices Remain Elevated
Another factor that has been weighing on the market sentiment is the surge in energy prices, which could fuel inflation and hurt consumer spending. Oil prices have risen to their highest levels since 2018, driven by strong demand and supply constraints.
On Friday, oil futures settled at $69.99 a barrel, up 2.3% for the day and 0.8% for the week. The price of natural gas also jumped to a seven-year high, as a strike at Chevron’s liquefied natural gas plants in Australia threatened to disrupt global supplies. Natural gas futures soared 10.5% on Friday, ending the week with a 16.6% gain.
Higher energy prices could pose a challenge for the Fed, as it tries to balance its dual mandate of maintaining price stability and full employment. The Fed has repeatedly said that inflation is transitory and will ease as the economy recovers from the pandemic shock. However, some analysts and investors are skeptical that inflation will subside anytime soon.