On a Friday, U.S. stocks experienced a significant rally in response to dovish comments made by U.S. Federal Reserve Chair, Jerome Powell. Powell’s remarks solidified expectations that the central bank will cut its key policy rate in September. The highly anticipated comments, delivered during the Jackson Hole Economic Symposium, highlighted Powell’s belief that “the time has come” to lower the Fed funds target rate. Additionally, Powell mentioned that “the upside risks of inflation have diminished,” signaling a shift in the Fed’s stance.
Following the release of Powell’s prepared remarks, all three major U.S. stock indexes witnessed a surge, with megacaps like Nvidia, Apple, and Tesla leading the charge. Notably, small caps and regional banks outperformed, inciting a rise of 3.2% and 4.9%, respectively. Ryan Detrick, Chief Market Strategist at Carson Group, noted that financials were at an all-time high, with significant growth in regional banks. This growth contradicts expectations of a looming calamity or recession.
Weekly Advances and Economic Indicators
The positive momentum continued as all three indexes logged weekly advances, building upon the largest Friday-to-Friday percentage gains of the year from the previous week. While the Fed prepares for its September rate decision, they will consider a slew of economic indicators, including the Commerce Department’s revised second-quarter GDP and the Personal Consumption Expenditures report. These reports will shed light on crucial aspects like inflation.
The Dow Jones Industrial Average rose by 462.3 points, the S&P 500 gained 63.97 points, and the Nasdaq Composite added 258.44 points. All 11 major sectors in the S&P 500 ended the session positively, with real estate shares seeing the largest percentage gain. Workday surpassed revenue expectations and announced a significant stock buyback plan, resulting in a 12.5% increase in its shares. On the other hand, Intuit witnessed a 6.8% decline in response to disappointing quarterly revenue.
Advancing issues on the NYSE outnumbered declining ones by a ratio of 8.08-to-1, while the Nasdaq saw a ratio of 3.68-to-1 in favor of advancers. The S&P 500 recorded 81 new 52-week highs, and the Nasdaq Composite saw 149 new highs. The total volume on U.S. exchanges was 10.57 billion shares, slightly lower than the 11.88 billion average over the last 20 trading days.
Jerome Powell’s dovish remarks had a significant impact on U.S. stocks, leading to a market rally and positive investor sentiment. The Fed’s upcoming rate decision in September will be closely monitored, especially in light of the economic indicators and market trends discussed.