- US stocks surged as Fed chair Jerome Powell signaled imminent interest rate cuts.
- Powell confirmed the dovish pivot in his speech at the Jackson Hole Economic Symposium.
- “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data,” Powell said.
US stocks rallied on Friday with the Dow Jones Industrial Average gaining more than 450 points after Federal Reserve Chairman Jerome Powell confirmed that interest rate cuts are near.
Powell indicated the central bank’s coming dovish pivot in his speech at the Jackson Hole Economic Symposium on Friday, saying that “the time has come for policy to adjust.”
Bond yields dropped during the day following the remarks. The 10-year Treasury yield fell six basis points to 3.801%, while the two year-note — which is highly sensitive to Fed policy — dropped nine basis points to 3.915%.
“The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” Powell said.
The Fed has largely said that the risks for its dual mandate of taming inflation and pursuing full employment are balanced in recent months, but on Friday, Powell changed his tune and said the risks to the downside are growing.
“Overall, the economy continues to grow at a solid pace. But the inflation and labor market data show an evolving situation. The upside risks to inflation have diminished, and the downside risks to employment have increased,” Powell said. “We do not seek or welcome further cooling in labor market conditions.”
That should pave the way for an interest rate cut at the Fed’s FOMC meeting in September.
“The Powell pivot is here, as the Fed has now firmly turned dovish,” Carson Group strategist Ryan Detrick said in an email to Business Insider on Friday, adding that the Fed is likely to enact multiple interest rate cuts in the coming months.
With interest rate cuts imminent, investors are now asking how big the Fed will cut rates by.
The CME FedWatch Tool suggests the Fed will launch its first interest rate cut at its September FOMC meeting and ultimately cut rates by nearly 100 basis points by the end of the year.
Here’s where US indexes stood at the 4:00 p.m. closing bell on Friday:
Here’s what else happened today:
In commodities, bonds, and crypto:
- West Texas Intermediate crude oil increased 2.62% to $74.92 a barrel. Brent crude, the international benchmark, jumped 2.38% to $79.06 a barrel.
- Gold was higher by 1.16% to $2,545.80 an ounce.
- The 10-year Treasury yield dipped six basis points to 3.801%.
- Bitcoin rose 5.43% to $63,663.
