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The U.S. economy is going through an unprecedented recession and a recovery will take time. However, Federal Reserve Chairman Jerome Powell is optimistic about it. Dow futures are up after his interview.
U.S. stock-index futures, including Dow, started the week with a rise as Federal Reserve Chairman Jerome Powell stated on Sunday that the U.S. economy will be rebuild.
He said the U.S. has, by now, been spending more than it’s been taking and now its citizens have to deal with the consequences.
“The time to do that is when the economy is strong. When unemployment is low, when economic activity is high, that’s when you deal with that problem. This is not the time to prioritize that concern. We have the ability to borrow at low rates. We have the ability to service that debt. And I would say this is the time when we can use that strength to our longer run benefit.”
However, he then went speaking on more optimistic terms as he said that this situation will go to take a while for the U.S. to get back.
“But I would just say this. In the– in the long run, and even in the medium run, you wouldn’t want to bet against the American economy. This economy will recover. It may take a while. It take a period of time. It could stretch through the end of next year. We really don’t know.”
Dow Futures Rising after Optimism from Powell
After the words of support from Powell, futures for the Dow Jones Industrial Average rose 532 points, or 2.25%, at 24,218 at 8:08 am ET, while the S&P 500 index went up 37,45 points, or 1.31%, at 2,901.15, and the Nasdaq-100 futures were increasing by 134.45 points, or 1.47%, at 9,287.
On Friday, the Dow went up 61 points, or less than 0.3%, to 23,685.42, while the S&P 500 jumped 11.20 points, or 0.4%, higher to end the session at 2,863.70. The Nasdaq Composite Index finished the week at 9,014.56 after gaining 70.84 points, or 0.8%.
Stocks closed out last week lower, with the Dow down 2.7%, the S&P 500 losing 2.3% and the Nasdaq 1.2% lower. Marking their worst weekly fall since the period ended March 20.
So Why the Market Is Rising?
Markets looked pretty ready to kick start the week with the rise after the worst weekly fall in almost two months, as Powell said more measures likely will be needed to pull the economy out of its downturn. When starting this last week, he, however, hasn’t specified what those measures will be but pointed to the likely need for more fiscal support from Congress.
“While the economic response has been both timely and appropriately large, it may not be the final chapter.”
However, on Sunday, Powell said that the way to the country’s recovery may take some times during which consumers could have a lack of confidence until tryings to find a vaccine for the coronavirus become successful.
That said, Powell went on cautiously regarding the likelihood for a approximately near-term revival of the economy that has shown signs of the extreme fall due to the measures put in order to limit the virus spread.
“In the long run and even in the medium run, you wouldn’t want to bet against the American economy.”
He added, though, that the unemployment rate could hit as high as 25%, marking levels that were not seen since the Great Depression. However, he stated that he doesn’t fear a second depression for the U.S., predicting the economic revival would begin in the second half of the year.
Rising cases in the U.S., however, where there are more than a third of the 4.7 million worldwide infections, has underpinned fitful trade in assets considered risky. Deaths in the U.S. rose above 90,988, more than a quarter of the more than 317,100 worldwide, according to figures from Johns Hopkins.
Which Stocks are the Best Buy Now?
Recently Tesla Inc (NASDAQ: TSLA) got the green light from local officials to resume operations at its Fremont, California, car factory, ending a battle with Alameda County officials, who had forbid the opening of plants and manufacturing facilities to slow the spread of coronavirus.
At the time of writing, Tesla stocks were growing by 3.51% to $827.20 in the premarket.
Also, Uber Technologies Inc (NYSE: UBER) shares might be in focus after food-delivery company GrubHub Inc. (GRUB) said it decided not to accept a buyout offer from the ride-sharing company.
Stocks of UBER were up by 3.20% to $32.47 while GrubHub was rising by 0.60% to $55.30 in pre-market trading.
SoftBank Group Corp (TYO: 9984) found itself in talks to sell a significant portion of its T-Mobile US Inc (NASDAQ: TMUS) stake to controlling shareholder Deutsche Telekom AG (DTEGY) as the Japanese technology conglomerate is trying to raise funds.
SoftBank was rising by 1.03% at 2:29 pm CET.