Traders on the floor of the New York Stock Exchange on Aug. 4, 2022.
Source: NYSE
Stocks rose Friday after Federal Reserve Chair Jerome Powell indicated interest rate cuts were on the horizon.
The Dow Jones Industrial Average climbed 381 points, or 0.9%. The S&P 500 gained 1.1%. The Nasdaq Composite advanced 1.7% as technology stocks outperformed.
Stocks took a leg up after Powell signaled decreases to interest rates ahead during his speech in Jackson Hole, Wyoming. But Powell did not provide specific information on when, or by how big any cuts to the borrowing cost would be.
“The time has come for policy to adjust,” Powell said during the Fed’s annual retreat. “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.”
That pleased traders, who are unanimous in betting on a rate cut at the September meeting, according to the CME Group’s FedWatch. But there’s less consensus over how big that decrease will be.
Technology stocks rallied with particular strength as investors grew hopeful that a lower-rate environment would benefit this group. Nvidia and Tesla both jumped around 4%, while Advanced Micro Devices popped more than 2%.
Small-cap stocks also gained on this outlook, with the Russell 2000 advancing more than 2%.
“Powell’s comments have brought a lot of excitement for traders, even though many expected the Fed to say that the time has come to make adjustments,” said Naeem Aslam, chief investment officer at Zaye Capital Markets. “It shows how deprived the market has been due to high interest rates.”
The three major averages are heading for a winning week despite some pressure on Thursday from rising Treasury yields. The S&P 500 and Nasdaq are now each up about 1.2% and 1.3%, respectively, on the week, while the Dow has added 0.9%.
