Stocks soared on Friday, wiping out the week’s earlier losses and pushing the Dow Jones Industrial Average to a new all-time high. This sharp rally came after Federal Reserve Chair Jerome Powell hinted that interest rate cuts are likely coming soon—possibly as early as September.

Powell’s comments surprised investors with a more “dovish” tone, meaning he showed more concern about the weakening job market than rising inflation. This shift in focus reassured markets that the Fed may start easing monetary policy even if inflation hasn’t dropped all the way to its target yet.

The S&P 500 jumped 1.5%, its biggest one-day gain since May. All major tech giants saw their stocks rise. Smaller companies, tracked by the Russell 2000 Index, surged nearly 4%. Bank stocks reached new highs, and even cryptocurrencies like Bitcoin and Ethereum saw big gains.

With Powell signaling that the Fed is likely to cut rates soon, traders increased bets on a September rate cut. Bond prices rose as yields dropped—especially for two-year Treasury notes, which saw a 10-basis-point decline. Meanwhile, the U.S. dollar weakened, making room for gains in other currencies like the euro and yen.

Powell stated that while inflation is still above target, the weakening labor market allows the Fed to be flexible. He emphasized that the central bank needs to consider both inflation and employment when deciding on interest rates.

Market analysts were quick to react. Krishna Guha of Evercore said Powell gave a clear green light for a September rate cut of 25 basis points. Chris Zaccarelli from Northlight Asset Management noted that Powell’s comments raised expectations so much that keeping rates unchanged would now be a surprise.

David Laut from Abound Financial added that although there’s still one more jobs report before the next Fed meeting, enough data already supports a rate cut. He expects stock markets to continue rising in the short term thanks to lower borrowing costs.

However, not everyone sees smooth sailing ahead. Bret Kenwell at eToro warned that cutting rates too early could reignite inflation, while cutting too late could harm the economy by worsening job losses. It’s a tough balancing act for the Fed.

Seema Shah of Principal Asset Management noted that while Powell’s speech was clearly leaning toward rate cuts, there’s no strong reason for a large 50-basis-point move. Doing so could send the wrong message to markets—suggesting political influence rather than data-driven decision-making.

Ellen Zentner from Morgan Stanley said it’s obvious that the Fed now sees job market weakness as a bigger threat than inflation. But she also pointed out that Powell reaffirmed the Fed’s 2% inflation goal, meaning they’re not completely letting inflation off the hook.

David Russell of TradeStation said Powell’s focus has clearly shifted from controlling prices to supporting jobs. He believes Powell wants to play it safe but still has time to adjust if new economic data changes the outlook before the September meeting.

In corporate news:

– Former President Donald Trump met with Intel CEO Lip-Bu Tan to finalize a deal giving the U.S. government nearly a 10% stake in the chipmaker.
– Apple is in early talks with Google about using its Gemini AI tech to improve Siri.
– Nvidia told suppliers to stop making components for its H20 AI chip.
– Meta Platforms agreed to spend at least $10 billion with Google Cloud and is hiring top AI talent from Apple.
– Boeing will begin formal talks with striking workers next week.
– Visa shut down its U.S. open-banking unit due to regulatory uncertainties.
– Ross Stores said rising inflation may boost demand for its discount products.
– Cenovus Energy plans to acquire MEG Energy for $5 billion to expand in Canada’s oil industry.

Market snapshot:

– The S&P 500 gained 1.5%
– Nasdaq 100 rose 1.5%
– Dow Jones climbed 1.9%
– Russell 2000 jumped 3.9%
– KBW Bank Index up 3.2%

Currency movements:

– U.S. Dollar Index dropped 0.8%
– Euro rose 1% to $1.1720
– British Pound rose 0.8% to $1.3518
– Japanese Yen rose 1% to 146.96 per dollar

Crypto rally:

– Bitcoin surged 3.8% to $116,657
– Ethereum jumped 14% to $4,835

Bond market:

– 10-year Treasury yield fell to 4.26%
– 2-year Treasury yield down to 3.69%
– 30-year Treasury yield dipped to 4.88%

Commodities:

– Oil (WTI) rose 0.5% to $63.82 per barrel
– Gold increased 1% to $3,372 per ounce

In summary, markets are now betting on lower interest rates coming soon, which is fueling optimism across stocks, bonds, and cryptocurrencies. But with more economic data on the way, investors will be watching closely for any signs that could change the Fed’s next move.