(Sharecast News) - Wall Street trading got off to a positive start on Thursday as market participants digested comments made by Federal Reserve chairman Jerome Powell regarding the central bank's plans for the future of monetary policy in the US.
As of 1535 BST, the Dow Jones Industrial Average was up 0.92% at 28,593.55 and the S&P 500 was 0.48% firmer at 3,495.46, while the Nasdaq Composite started out the session 0.21% stronger at 11,689.93.
The Dow opened 261.63 points higher on Wednesday, extending a rally started in the previous session.
Thursday's main focus was a speech from the Fed's Jerome Powell at the central bank's annual symposium, held virtually this year as opposed to its usual site in Jackson Hole.
Powell stated the Fed had formally agreed to a policy of "average inflation targeting", meaning the central bank would let inflation run "moderately" above its 2% goal for "some time" despite attempting to cap it at that level for several years.
He also acknowledged the importance of a strong labour market, stating it would ensure that US employment doesn't fall below its maximum level.
Bank stocks picked up gains on the announcement, while the yield on the benchmark 10-year Treasury notes climbed to 0.72%.
Markets.com's Neil Wilson said: "Essentially the Fed is taking a step back from price stability, it is not going to worry about inflation overshooting; the focus is on employment not stable money.
"It's about supporting the economy not prices - this is an important shift, albeit one that we have largely assumed unofficially to be the case for some time. The Fed today made it clear it won't take the punch bowl away as quickly as it would have done in the past."
Wilson also highlighted that the Federal Reserve was "keeping its hands relatively free" by not standing by any specific formula relating to average inflation targeting, leaving investors with some unanswered questions for the FOMC.
Also in focus was data from the Labor Department that revealed the number of Americans filing for unemployment benefits fell slightly last week after an unexpected increase the week before.
While initial jobless claims fell by 98,000 week-on-week, they remained above 1.0m in the seven days ended 22 August from the previous week's revised level.
In other macro news, a second reading of the US economy in the second quarter revealed the largest quarterly drop in history.
The Commerce Department said gross domestic product tumbled 31.7% year-on-year as the Covid-19 pandemic wreaked havoc on the nation's economy throughout the quarter. However, the fall was slightly better than initial estimates for a decline of 32.9%.
Elsewhere, pending home sales increased 5.9% month-on-month in July, according to the National Association of Realtors. Annually, sales increased by 15.5%.
Lawrence Yun, the NAR's chief economist, said: "We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market. Home sellers are seeing their homes go under contract in record time, with nine new contracts for every ten new listings."
Still to come, the Kansas City Fed's manufacturing index will be published at 1600 BST.
In corporate news, Abbott Laboratories shares were higher in early trade after the firm secured emergency-use authorisation for its $5 Covid-19 test, while Williams-Sonoma shares were lower after the bell despite posting a second-quarter profit beat overnight.
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