Published: Sun, January 06, 2019
Markets | By Otis Pena

Dow ends up 3.3% as stocks rally on jobs data, dovish Fed

Dow ends up 3.3% as stocks rally on jobs data, dovish Fed

Federal Reserve Chairman Jerome Powell on Friday said he would not resign if President Donald Trump asked him to do so.

Asked if he would resign if Trump asked him to do so, Powell responded with a short "no".

"I'll just say that we are listening carefully to that ..., listening sensitively to the message that markets are sending, and we are going to be taking those downside risks into account as we make policy going forward".

Powell said the Fed will act on the current normalization of the balance sheet if conflicts with the Fed's goals arise.

Speaking after months of volatility in world bond and stock markets, Powell avoided some of the communication missteps that in the past have roiled rather than calmed investors.

Yellen, the Fed chair from 2014 to 2018 before Trump replaced her with Powell last February, said: "Obviously, the president has the right to comment on the Fed, but I would worry that if it continues or intensifies that it could undermine confidence in the Fed - and the market confidence in the Fed's judgment".

Near 1540 GMT, the Dow Jones Industrial Average was up 2.5 per cent at 23,247.05, winning back most of the 2.8 per cent lost on Thursday amid fears of slowing growth.

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Powell's willingness to be flexible on interest rates was welcome news to investors, many of whom anxious that Fed chair risked cutting off the current economic expansion by continuing to raise interest rates despite signs the USA economy was cooling off a little.

Federal Reserve Chairman Jerome Powell on the state of the USA economy, the December jobs report and the ISM report on manufacturing. Under the law that governs the Federal Reserve, a president can only remove a Fed chairman for cause.

Asked if there were any plans to meet with Trump, he declined to give a specific answer, simply saying "I would say that meetings between presidents and Fed chairs do happen".

Powell's comments, made during a panel discussion in Atlanta, were immediately cheered by financial markets, which were already rallying on the basis of a strong unemployment report that showed 312,000 jobs were created in December.

Although still low by historical standards, this latest hike put interest rates at the highest level in almost a decade.

At the time, Powell said there was a "fairly high degree of uncertainty" about the future of further rate hikes, but not that rates have effectively arrived at the lower-end range of neutral.

Non-farm payrolls rose by 312,000 jobs in December, smashing forecasts and highlighting strength in the United States economy despite Wall Street's losses last month. "The Fed has wilfully ignored trade and interest rate risks while talking a hawkish game".

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