Stocks rose on Friday as dovish comments from Federal Reserve Chairman Jerome Powell bolstered expectations that the central bank will cut its key policy interest rate in September.
The Dow Jones Industrial Average rose 462.30 points, or 1.1%, to 41,175.08, just 23 points off its all-time high. The S&P 500 rose 1.2%, and the Nasdaq added 1.5%. All three indexes are up more than 1% this week.
In highly anticipated remarks ahead of the Jackson Hole Economic Symposium, Powell said the “time has come” to lower the target for the federal funds rate, adding that “risks of higher inflation have receded.”
“I do not expect, and would not welcome, a further deterioration in labor market conditions,” Powell added in a speech that all but guaranteed a rate cut at next month’s policy meeting, the first in more than four years.
“Chairman Powell is taking a dovish tone today and markets are likely to react accordingly,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “What he’s suggesting is that if the labor market continues to weaken, the September rate cut will be 50 basis points rather than 25.”
After Powell’s comments were released, all three major stock indexes continued to rise, with large caps Nvidia, Apple and Tesla leading the way.
Small and mid-cap stocks and regional banks performed well.
“We’re seeing modest gains after yesterday’s decline,” said Jay Hatfield, portfolio manager at InfrastructureCap in New York. “We’re seeing the expected gains in interest rate sensitive stocks.”
Next week, the data-dependent Fed will consider a host of economic indicators ahead of its September interest rate decision, including the Commerce Department’s revised second-quarter GDP figure and the broad personal consumption expenditures (PCE) report, which includes the PCE price index, the Fed’s preferred inflation measure.
Of the 11 major sectors in the S&P 500, all except Consumer Staples were in positive territory. Real estate stocks had the biggest percentage gains.
Workday reported better-than-expected quarterly sales and announced a $1 billion share repurchase plan, sending the human capital management software company’s shares up 12%, the biggest gain on the Nasdaq.
Discount retailer Ross Stores Inc. saw its shares rise about 2% after the company raised its profit forecast for fiscal 2024.
TurboTax parent Intuit fell 6.8% after disappointing quarterly earnings.
