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\n Stocks surged Friday and the Dow closed at its first record high of the year after Federal Reserve Chair Jerome Powell signaled interest rate cuts<\/a> could be on the way.\n <\/p>\n \n The Dow rose 846 points, or 1.89%, to close at an all-time high of 45,631.74. It\u2019s the Dow\u2019s first closing record high since December 4.\n <\/p>\n \n The broader S&P 500 gained 1.52% and the tech-heavy Nasdaq Composite gained 1.88%. The S&P posted its best day since May and snapped a five-day losing streak. The Dow also had its best day since May.\n <\/p>\n \n Investors across the globe were attuned to Powell\u2019s speech at an annual central banking forum in Jackson Hole, Wyoming. Markets cheered his remarks that a shift in interest rate policy may be needed \u2014 though any rate cut would be in response to slowing growth in the labor market.\n <\/p>\n \n \u201cThe baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,\u201d Powell said.\n <\/p>\n \n \u201cDownside risks to employment are rising,\u201d he said. \u201cAnd if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.\u201d\n <\/p>\n \n Wall Street had expected Powell would be cautious about hinting at rate cuts, so the signal that the central bank might consider lowing rates was enough for stocks to take off on a rally.\n <\/p>\n \n \u201cInvestors are enthusiastic that the Fed will likely resume its easing cycle next month,\u201d Jos\u00e9 Torres, senior economist at Interactive Brokers, said. \u201cLighter rates are bolstering trader sentiment and widening the path for a broader rally into year-end.\u201d\n <\/p>\n \n The Fed has held its benchmark interest steady since December. A Fed rate cut would lower savings and borrowing rates, boosting spending and investing while stimulating business activity, creating a sustained tailwind for the stock market.\n <\/p>\n \n A rate cut can also lower bond yields, making higher-yielding assets like stocks more appealing for investors.\n <\/p>\n \n Powell took a more \u201cdovish\u201d tone than markets were expecting, according to Krishna Guha, vice chairman at Evercore ISI. A dovish tone means Powell indicated he\u2019s concerned about the labor market and growth and potentially ready to lower interest rates to stimulate economic activity.\n <\/p>\n \n \u201cPowell\u2019s dovish Jackson Hole comments suggest the Federal Reserve is ready to cut interest rates in September, which is just what investors were hoping to hear, given the recent slowdown in the labor market,\u201d David Laut, chief investment officer at Abound Financial, said in an email.\n <\/p>\n \n \u201cThe stock market tends to favor lower interest rates and since Powell hinted at the likely prospect of a September cut, we expect the market\u2019s bullish trend to continue over the short term,\u201d Laut said.\n <\/p>\n \n Powell discussed concerns about inflation, which still runs above the Fed\u2019s target of 2%, but leaned into acknowledging a cut might be needed to support the labor market.\n <\/p>\n \n \u201cOf course, we cannot take the stability of inflation expectations for granted,\u201d he said. \u201cCome what may, we will not allow a one-time increase in the price level to become an ongoing inflation problem.\u201d\n <\/p>\n \n \u201cPowell threaded the needle perfectly \u2014 dovish enough to keep September cuts alive but disciplined enough to maintain Fed credibility amid political pressures,\u201d Jayson Bronchetti, CIO at Lincoln Financial, said in an email. \u201cInvestors saw the markets rip higher as Powell\u2019s commencement style address acknowledged that while inflation progress has been made, the labor market is cooling faster than expected.\u201d\n <\/p>\n \n Wall Street had been divided on whether Powell would hint at rate cuts or note that uncertainty about inflation gives credence to a wait-and-see approach.\n <\/p>\n \n Bonds rallied sharply Friday as traders digested Powell\u2019s remarks that cuts are likely on the way.\n <\/p>\n \n \u201cStocks and bonds knee-jerked to a very happy place when Chair Powell opened the door to a September rate cut,\u201d Carol Schleif, chief market strategist at BMO Private Wealth, said in an email.\n <\/p>\n \n The 2-year, 10-year and 30-year Treasury yields all fell as investors snapped up bonds to lock in high rates ahead of a potential Fed rate cut in September.\n <\/p>\n \n Yields and prices trade in opposite directions. If the Fed is expected to cut rates, investors will snap up bonds to secure the current high rates, pushing yields lower.\n <\/p>\n \n \u201cFed Chair Powell has clearly opened the door for a 0.25% rate cut at the September FOMC meeting, largely predicated on the recent cooling in the labor market,\u201d Chip Hughey, managing director for fixed income at Truist Advisory Services, said in an email.\n <\/p>\n \n Traders are now pricing in an 83% chance the Fed cuts rates in September, up from a 75% chance before Powell began his remarks.\n <\/p>\n \n Meanwhile, Wall Street\u2019s fear gauge, the CBOE Volatility Index, sank 13.8%, signaling relative calm in markets. The US dollar index, which measures the dollar\u2019s strength against six major foreign currencies, fell 0.9% on expectations for rate cuts and signs of slowing economic growth.\n <\/p>\n \n The Dow on Friday clinched its first closing record high of the year. It\u2019s been 177 trading days since the Dow\u2019s last closing record in December, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.\n <\/p>\n \n It marks the completion of a remarkable recovery for the blue-chip index. The Dow in April had dropped as much as 16%<\/a> from its previous peak in December before clawing back those losses.\n <\/p>\n![\"Federal](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/08\/2025-08-22t005117z-2129376336-rc20cgacukvp-rtrmadp-3-usa-fed-jacksonhole.JPG\")
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