Markets Surge as Fed Signals Likely September Rate Cut

Stocks soared on Friday, wiping out earlier weekly losses after Federal Reserve Chair Jerome Powell made surprisingly cautious comments that boosted hopes for a near-term interest rate cut. His remarks shifted the market’s mood, pushing the Dow Jones Industrial Average to a record high and sparking a widespread rally across stocks, bonds, and cryptocurrencies.

Powell’s speech at the Jackson Hole conference focused more on risks to the job market than inflation. That shift signaled to investors that the Fed may not wait for perfect inflation numbers before cutting rates. The idea that rate cuts could come as early as September sent the S&P 500 up by 1.5%, marking its best day since May. Big tech companies all gained, small-cap stocks jumped 4%, banks hit new highs, and cryptocurrencies surged.

Interest rate expectations also shifted. Traders are now betting heavily on a rate cut in September. U.S. Treasury yields fell across the board, with two-year yields dropping by 10 basis points. The U.S. dollar weakened, with major currencies like the euro and yen posting strong gains.

Here’s what Powell said: “The stability of the unemployment rate and other labor market measures allows us to proceed carefully… but with policy still in restrictive territory, we may need to adjust our stance.” This was interpreted as a clear sign that a rate cut is likely coming soon.

Experts React to Powell’s Dovish Tone

Market analysts were quick to weigh in. Krishna Guha from Evercore said Powell’s speech was “much more dovish than the market feared,” opening the door for a 25 basis point cut in September.

Chris Zaccarelli of Northlight Asset Management noted, “Powell did something unexpected — he signaled the Fed is ready to cut rates next month.” He added that the Fed now has a high bar to clear if it wants to keep rates unchanged.

David Laut at Abound Financial emphasized that even though one more jobs report is due before the September meeting, current data is enough to justify a cut. “Since Powell hinted at a September cut, we expect the bullish trend in stocks to continue for now,” Laut said.

Still, some caution remains. Bret Kenwell at eToro pointed out the balancing act the Fed faces: cut too early and inflation might rise again; wait too long and the labor market could get worse.

Seema Shah from Principal Asset Management agreed that Powell’s comments support a moderate 25 basis point cut but warned against anything bigger. “A 50-point cut could seem politically driven and might push long-term yields higher, hurting risk assets,” she said.

Ellen Zentner at Morgan Stanley noted that Powell’s emphasis on labor market weakness over inflation shows where the Fed’s focus has shifted. “Long-term, it’s still uncertain how fast or far rates will be cut,” she added.

David Russell at TradeStation summed it up: “Powell just flipped the Fed’s focus from inflation control to protecting jobs. With job growth slowing and claims rising, it’s better to act early than risk a deeper downturn.”

However, he also warned there’s still key economic data to come before September. “If upcoming jobs or inflation data comes in strong, Powell can toughen his tone without losing credibility,” Russell said.

Key Corporate Headlines

– Intel CEO Lip-Bu Tan met with former President Donald Trump to finalize a deal giving the U.S. government nearly a 10% stake in Intel.
– Apple is exploring a partnership with Google to use Gemini AI for an upgraded Siri voice assistant.
– Nvidia has reportedly halted production of its H20 AI chip with suppliers like Samsung and Amkor.
– Meta Platforms struck a $10 billion cloud services deal with Google and is continuing to hire top AI talent from Apple.
– Boeing is set to begin formal talks with union leaders as it tries to end a strike at its defense plants in St. Louis.
– Visa has shut down its open-banking business in the U.S., citing regulatory uncertainty around customer data rights.
– Ross Stores forecast higher sales as inflation pushes more shoppers toward discount retailers.
– Cenovus Energy agreed to acquire MEG Energy for $5 billion, outbidding Strathcona Resources to expand its role in Canadian oil production.

Market Performance Highlights

STOCKS
– S&P 500: +1.5%
– Nasdaq 100: +1.5%
– Dow Jones Industrial Average: +1.9%
– Russell 2000 (small-caps): +3.9%
– KBW Bank Index: +3.2%
– MSCI World Index: +1.5%
– Bloomberg Magnificent 7 Index: +2.5%

CURRENCIES
– U.S. Dollar Index: -0.8%
– Euro: +1% to $1.1720
– British Pound: +0.8% to $1.3518
– Japanese Yen: +1% to 146.96 per dollar

CRYPTOCURRENCIES
– Bitcoin: +3.8% to $116,657.37
– Ether: +14% to $4,835.10

BONDS
– 10-Year Treasury Yield: -7 basis points to 4.26%
– 2-Year Treasury Yield: -10 basis points to 3.69%
– 30-Year Treasury Yield: -4 basis points to 4.88%
– Germany 10-Year Yield: -3 basis points to 2.72%
– UK 10-Year Yield: -4 basis points to 4.69%

COMMODITIES
– WTI Crude Oil: +0.5% to $63.82 per barrel
– Spot Gold: +1% to $3,372.48 per ounce

Summary

Markets are feeling upbeat as investors brace for what could be the first Fed rate cut in months. Powell’s unexpected dovish tone shifted sentiment quickly, encouraging gains across almost every asset class—from tech stocks and banks to cryptocurrencies and bonds.

With key economic data still ahead, all eyes are now on whether job numbers or inflation figures in August will support—or challenge—this bullish narrative heading into the Fed’s next meeting in September.