Wall Street experienced a surge on Friday following remarks by the head of the U.S. Federal Reserve suggesting potential interest rate cuts, although the timing remained uncertain. The S&P 500 soared by 1.3%, recovering all losses for the week, while the Dow Jones Industrial Average rose by 649 points (1.4%) and the Nasdaq composite climbed 1.3%.
Investors had anticipated Jerome Powell’s speech at a central bankers’ symposium in Jackson Hole, Wy., hoping for indications of imminent rate cuts. Lower rates are favored by Wall Street as they can stimulate the economy and boost investment prices, despite the risk of inflation escalation.
President Donald Trump has been vocal in calling for rate reductions, with a recent weak job growth report reinforcing expectations of cuts at the upcoming Fed meeting in September. Powell, however, refrained from specifying timing in his speech, emphasizing the Fed’s readiness to act as needed, maintaining interest rates at a steady level this year.
The Fed’s mandate includes ensuring a healthy job market and containing inflation, with adjustments in interest rates impacting these aspects inversely. Powell acknowledged the current job market’s stability but highlighted concerns about inflation potential due to trade tariffs.
In summary, Powell emphasized a cautious approach to policy changes, citing the need for careful consideration amidst stable unemployment rates and labor market dynamics.
Following the release of Powell’s speech, Treasury yields declined in the bond market, with the 10-year Treasury yield dropping to 4.27% from 4.33%, and the two-year Treasury yield decreasing to 3.71% from 3.79%. Meanwhile, Nvidia saw a 0.9% increase to mitigate losses for the week, with discussions on a potential new computer chip for China ongoing.
Nvidia’s CEO mentioned plans for a chip specifically designed for China, focusing on graphics processing units, which are less potent than the company’s current top semiconductors restricted from sale to China due to U.S. national security regulations.
