US Stocks Extend Rally As Powell Says No Rush On Rate Rises

US stocks extended a recent rally Thursday after Federal Reserve chief Jerome Powell took a major step to stimulate the economy by saying he would not rush to raise interest rates and would accept inflation above the central bank's two-percent target "for some time."

Allowing inflation to overshoot is aimed at boosting job creation as the Fed shifts emphasis more towards its goal of "maximum employment," since low unemployment has not been driving prices significantly higher in recent years.

"This change reflects our appreciation for the benefits of a strong labor market, particularly for many in low- and moderate-income communities," said Powell, adding that the Fed is prepared to use "our full range of tools to support the economy."

The Dow ended the day 0.6 percent higher and the S&P rose to its fifth consecutive record high, though tech stocks pared back their gains with the Nasdaq ending lower.

"The Fed made it pretty clear: the fiscal side is pretty much a mess, I want everyone to know we got your back. That was the message conveyed, and the market took it well," Maris Ogg of Tower Bridge Advisors told AFP.

Abbott Laboratories hit a 52-week high after the White House announced President Donald Trump is poised to announce a deal to buy 150 million rapid coronavirus tests from the US company.

Banking stocks also climbed, no doubt buoyed by the promise of continuing low interest rates. Citigroup rose 1.7 percent, JPMorgan Chase 3.3 percent and Bank of America 1.9 percent.

Hurricane Laura has closed down three million barrels of oil capacity as it churns towards the Texas and Louisiana coasts GETTY IMAGES NORTH AMERICA / Thomas B. Shea

Elsewhere, equities were subdued as traders weighed geopolitical concerns which resurfaced after Beijing reportedly fired missiles during exercises around the South China Sea and the United States sanctioned several Chinese firms linked to the disputed region.

European markets closed having lost ground, with London notably sagging on record net first half losses for Rolls Royce as the coronavirus outbreak grounded aircraft worldwide and sparked a crisis in air transport.

Asian trade was grounded by a fresh flare-up in coronavirus cases in the region, and the mood worsened after Bloomberg News reported that China had fired four ballistic missiles into the South China Sea as part of a military exercise, a day after Beijing said a US spy plane had entered a no-fly zone in northern China.

The region is one of a number of issues over which China-US tensions have spiked in recent months.

In July, Washington declared Beijing's pursuit of territory and resources there illegal, explicitly backing the territorial claims of Southeast Asian countries against China.

And on Wednesday, it imposed sanctions and restrictions on 24 Chinese companies and associated officials for taking part in building artificial islands in the disputed waters.

Oil traders are meanwhile keeping tabs on Hurricane Laura in the Gulf of Mexico, which made landfall in Louisiana on Thursday morning.

Around three million barrels a day of refining capacity have been closed after US authorities said the hurricane could bring "potentially catastrophic storm surges, extreme winds and flash flooding."