Dow jumps 800 points to record, S&P 500, Nasdaq soar as Powell’s Jackson Hole finale fuels bets on September rate cut

US stocks surged on Friday, fueled by Federal Reserve Chair Jerome Powell’s influential speech at the annual Jackson Hole Economic Symposium. His comments around a potential interest rate cut in September sparked optimism among investors, leading to significant gains across major indices. The Dow Jones Industrial Average climbed 800 points, or 1.9%, closing at a record high. Both the S&P 500 and Nasdaq Composite also experienced strong performances, gaining 1.5% and 1.9%, respectively.

The dramatic market turnaround came after a turbulent week where technology stocks faced headwinds due to concerns surrounding artificial intelligence investments. Despite the earlier losses, Friday’s rally underscored investor sentiments shifting toward the prospect of reduced interest rates, especially after Powell’s remarks hinted at a softer monetary policy in light of recent labor market data.

### Jerome Powell’s Key Takeaways

In his much-anticipated address, Powell suggested that the Federal Reserve might need to adjust its policy to align with the evolving economic landscape. He stated, “the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.” This commentary significantly affected traders’ views on interest rates, with the probability of a September rate cut skyrocketing to approximately 91.5%, compared to just 70% earlier that day.

### Market Reactions

Investors reacted swiftly to Powell’s hints, which had implications beyond stock performance. The yield on 10-year Treasuries fell by about five basis points to around 4.27%, and the 30-year yield dropped slightly as well. This decline in yields signaled a potential easing of borrowing costs, which typically supports stock prices, particularly in growth sectors such as technology and cryptocurrencies.

Cryptocurrencies also surged following Powell’s speech, with Ethereum leading the charge, soaring by 8.6%. Bitcoin experienced a more modest increase of about 2.7%. The positive sentiment across risk assets indicated a general acceptance of the likelihood of lower interest rates, promoting an environment conducive to higher valuations.

### Political Pressure and Uncertainty

However, Powell’s remarks were made against the backdrop of increasing political pressure from the Trump administration, which has pushed for lower rates. President Trump specifically called for the resignation of Fed Governor Lisa Cook, citing allegations of mortgage fraud. This political backdrop could create uncertainty around the Fed’s independence, raising concerns about the long-term implications of policy actions.

### Earnings Highlights

On the earnings front, companies had mixed results. Zoom’s stock rose significantly—up 5%—after reporting strong growth driven by artificial intelligence contributions to its revenue. Conversely, Ross Stores also saw robust performance as consumers sought discounts amid rising tariffs. Intuit and Workday, on the other hand, faced declines due to disappointing earnings forecasts.

Intel was a standout performer, with its shares jumping 5% after President Trump announced that the U.S. government would acquire a 10% stake in the company, viewing it as a “great deal.” Although this move aims to stabilize Intel amidst its challenges, it also shows how intertwined politics and business are in today’s economy.

### Conclusion

In summary, Powell’s Jackson Hole speech injected a renewed sense of optimism into the markets, reverberating across major stock indices and risk assets. The prospect of a September rate cut appears to have provided a much-needed stimulus for investors shaken by recent market volatility. However, the inherent uncertainties regarding political influences on the Federal Reserve add a layer of complexity to the outlook for both economic policy and stock market sentiment.

As investors look ahead, they will remain vigilant for further guidance from the Fed, economic indicators, and the broader implications of geopolitical developments. The question now is whether the momentum can be sustained, particularly in the context of fluctuating consumer sentiment and ongoing market challenges surrounding technology and inflation. With earnings season continuing, the next set of financial results will be crucial in shaping market perceptions going forward.

Source link