Wall Street Rallies After Powell Signals Fed Flexibility/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. stocks surged Friday as Federal Reserve Chair Jerome Powell hinted that interest rate cuts may be on the horizon, though he gave no firm timeline. Investor optimism was also fueled by easing bond yields and strong earnings from major companies. Wall Street’s rally erased recent losses and boosted hopes of a softer monetary stance.
Wall Street Rally: Quick Looks
- S&P 500 jumped 1.6%, erasing weekly losses.
- Dow Jones surged 2.1%; Nasdaq rose 1.9%.
- Powell indicated rate cuts could be considered, with no exact date.
- Treasury yields fell sharply following Powell’s speech.
- Investors see hope for a rate cut in September.
- Trump continues pushing for cuts, citing weak job growth.
- Retailer Ross Stores beat earnings expectations.
- Chinese EV maker Nio surged 9.8% on SUV pre-sales.
- Nvidia climbed 1.8% after CEO confirmed talks on China chip plans.
Wall Street Rallies After Powell Signals Fed Flexibility
Deep Look
NEW YORK — U.S. markets surged Friday morning as investors digested a closely watched speech by Federal Reserve Chair Jerome Powell, who signaled that interest rate cuts may soon be on the table, although he offered no specific timeline. The remarks, delivered at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, gave Wall Street just enough optimism to send stocks sharply higher.
The S&P 500 leaped 1.6%, and its first gain in six days has it on track to top its all-time high set last week.
The Dow Jones Industrial Average soared 939 points, or 2.1%, and was above its last all-time high, which was set in December. The Nasdaq composite was up 1.9%, as of 11:55 a.m. Eastern time.
“Ka-Powell” is how Brian Jacobsen, chief economist at Annex Wealth Management, described the reaction to Jerome Powell’s highly anticipated speech in Jackson Hole, Wyoming. “The Fed isn’t going to be the party-pooper.”
Powell Opens Door to Possible Easing
While Powell did not commit to cutting interest rates in September, his tone was notably more flexible than in previous appearances. He acknowledged that the central bank could adjust its policy “as necessary” in response to evolving economic conditions.
“The stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance,” Powell said.
This language echoed the Fed’s long-standing focus on data-dependent policy, but was widely interpreted by markets as a green light for easing should inflation remain under control and economic momentum slow further.
Markets Cheer Fed Flexibility
Wall Street has been eager for signs that the era of high interest rates — used to combat post-pandemic inflation — may soon come to a close. Lower interest rates make borrowing cheaper, stimulate corporate investment, and tend to boost stock and bond prices.
Investor hopes were further fueled by this month’s weaker-than-expected job growth report, which some believe strengthens the case for a rate cut.
However, Powell emphasized the ongoing risk of inflation, particularly due to Trump-era tariffs, which are inflating prices on consumer imports like furniture, toys, and shoes.
Bond Market Reacts Swiftly
Following the release of Powell’s speech, bond yields dropped sharply — a signal that investors believe monetary policy could soon loosen.
- The 10-year Treasury yield fell to 4.27% from 4.33% the day before.
- The 2-year yield, more closely tied to Fed rate expectations, dropped to 3.71% from 3.79%.
These moves reflect growing confidence in a potential September rate cut, though market participants remain cautious about timing.
Strong Earnings Boost Sentiment
Beyond Fed commentary, positive earnings reports helped fuel Friday’s rally. Notably, Ross Stores rose 1.7% after beating Wall Street expectations for quarterly profits. CEO Jim Conroy noted that sales momentum picked up in July, helping offset a slower June.
Another standout was Nio, the Chinese electric vehicle manufacturer whose U.S.-listed shares surged 9.8%. The rally followed the pre-sale launch of its flagship luxury SUV, the ES8, and added optimism to the EV sector.
Nvidia Edges Higher Amid AI and Trade Talk
Nvidia, a key player in the artificial intelligence boom, rose 1.8% on Friday, trimming its weekly losses. The stock has recently faced volatility over concerns it became overvalued amid AI euphoria, but regained ground after CEO Jensen Huang revealed the company is in talks with the Trump administration about launching a new graphics chip for the Chinese market.
Due to U.S. export restrictions, Nvidia cannot sell its most advanced chips to China, but is reportedly exploring a less powerful AI chip that complies with national security guidelines.
Global Markets Mixed
Outside the U.S., global market performance was mixed:
- Germany’s DAX index rose 0.1%, following a report showing the country’s economy shrank by 0.3% in Q2.
- In Asia, Shanghai’s stock index climbed 1.4%, and South Korea’s rose 0.9%, reflecting broader optimism after Powell’s remarks.
Looking Ahead
With Powell’s remarks now public, attention shifts to the Fed’s next meeting in September, where the decision to hold or cut rates could set the tone for financial markets through year-end. Investors will continue to track:
- Inflation metrics
- Labor market trends
- Trade policy shifts
For now, Friday’s rally suggests that Wall Street is betting on a pivot — or at least an opening — to a less restrictive monetary policy.
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