U.S. Stocks Rally as Fed Signals Rate Cut Possibility
(MENAFN) U.S. stocks surged on Friday, marking significant gains after Federal Reserve Chair Jerome Powell hinted at the possibility of an interest rate cut, pushing Wall Street to new highs.
The Dow Jones Industrial Average jumped 846.24 points, or 1.89%, closing at a record 45,631.74. The S&P 500 rose by 96.74 points, or 1.52%, finishing at 6,466.91, while the Nasdaq Composite soared 396.22 points, or 1.88%, to 21,496.54.
Among the 11 major S&P 500 sectors, ten closed in the green. Consumer discretionary stocks led the way, climbing 3.18%, followed by a 1.99% increase in energy stocks. The only sector to decline was consumer staples, down 0.35%.
In his speech at the Federal Reserve's annual Jackson Hole symposium, Powell suggested that economic conditions might warrant a shift in the Fed's policy stance. He acknowledged a potential change in the balance between the Fed's goals of full employment and stable prices, citing "sweeping changes" in tax, trade, and immigration policy as factors influencing the broader economic picture.
Economists noted Powell's remarks were more dovish than expected, with ING's Padhraic Garvey and Chris Turner stating that Powell's reluctance to rule out a rate cut signals a possible adjustment, primarily due to weakening labor market conditions and easing inflation concerns stemming from tariffs.
As a result, expectations for a rate cut in September surged to approximately 83%, up from 75% earlier in the week, based on data from CME Group's FedWatch tool.
Technology stocks were among the biggest beneficiaries of Powell's dovish tone. Nvidia gained 1.72%, Meta climbed 2.12%, while Alphabet and Amazon both rose by more than 3%. Tesla’s stock led the tech rally, skyrocketing 6.22%, fueling broader market gains.
Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, remarked that the chances of the Fed holding rates steady in the coming weeks are slim, suggesting that both stock and bond markets are responding positively to Powell’s remarks.
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