Stocks closed higher Monday as investors brushed off concerns over the possibility of more interest rate hikes.
Federal Reserve Chair Jerome Powell said in his speech at Jackson Hole last Friday that the central bank is prepared to do whatever it takes to bring inflation down, even if that means additional rate hikes. Powell also reiterated that the Fed remains data dependent in its decision making, which makes this week's key economic reports all the more important.
Despite a rather choppy session for the main indexes, all three managed to stay in positive territory throughout the day. At the close, the Nasdaq Composite was up 0.8% at 13,705, the S&P 500 had added 0.6% to 4,433, and the Dow Jones Industrial Average had gained 0.6% to 34,559.
This week's raft of economic reports has the potential to spark stock market volatility into the long holiday weekend given how closely it is being watched by the Fed. (As a reminder, the stock market will be closed next Monday, September 4, for Labor Day.) Among the most anticipated data points are the July personal consumption expenditures (PCE) index – the Fed's preferred gauge of inflation – which is due out ahead of Thursday's open, and Friday morning's August jobs report.
"Federal Reserve Chair Jerome Powell kept the possibility of further rate hikes firmly on the table during his Jackson Hole speech, as inflation still remains above its 2% target, and the central bank is committed to that target," says Rod von Lipsey, managing director at UBS Private Wealth Management. "This week's core PCE figures and the next CPI report in mid-September will be of extra importance in gauging how the Fed may act at its late September meeting."
Hawaiian Electric stock jumps after disputing wildfire claims
In single-stock news, Hawaiian Electric Industries (HE) stock surged nearly 45% today after the utility company disputed claims that faulty power lines were the cause of the early August Lahaina wildfire that killed more than 100 people and burned over 3,000 acres. Maui County last Thursday filed a lawsuit against Hawaiian Electric alleging negligence on the part of the utility company.
"We were surprised and disappointed that the County of Maui rushed to court even before completing its own investigation," said Shelee Kimura, president and CEO of Hawaiian Electric, in the company's press release. "We believe the complaint is factually and legally irresponsible." The utility stock remains almost 64% lower for the month-to-date.
3M pops on earplug settlement reports
Elsewhere, 3M (MMM) shares jumped 5.2% after a report in The Wall Street Journal indicated the industrial conglomerate was nearing a settlement over its flawed earplugs. More than 300,000 lawsuits have been filed against 3M by veterans claiming the earplugs produced by the company and its subsidiary Aearo Technologies did not protect them from hearing damage. According to the WSJ, the settlement would require 3M to pay $5.5 billion, which is much less than the $10 billion to $15 billion in damages some analysts were expecting.
"We view the pending settlement as a positive for MMM, reducing the company's hefty litigation risk," says CFRA Research analyst Jonathan Sakraida. However, the analyst maintained a Hold rating on the Dow Jones stock, "as we still note several quarters of eroding sales across MMM's lines of business."
