WASHINGTON (dpa-AFX) - After trending lower over the past several sessions, stocks showed a substantial move back to the upside during trading on Friday. The major averages all moved sharply higher on the day, with the Dow reaching a new record closing high.
The major averages ended the day well off their best levels but still posted strong gains. The Dow shot up 846.24 points or 1.9 percent to 45,631.74, the Nasdaq surged 396.22 points or 1.9 percent to 21,496.53 and the S&P 500 jumped 96.74 points or 1.5 percent to 6,466.91.
For the week, the major averages turned in a mixed performance. While the Nasdaq slid by 0.6 percent, the S&P 500 rose by 0.3 percent and the Dow leapt by 1.5 percent.
The rally on Wall Street came in reaction to Federal Reserve Chair Jerome Powell's highly-anticipated speech before the Jackson Hole Economic Symposium.
While Powell touched only briefly on the outlook for monetary policy, his remarks have increased investor confidence that the Fed will lower interest rates next month.
Powell noted the labor market remains near maximum employment and inflation has come down a great deal from its post-pandemic high but cautioned 'the balance of risks appears to be shifting.'
He noted interest rates are a full percentage point lower than a year ago and said the 'stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance.'
'Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,' Powell added.
The Fed Chief reiterated that monetary policy is not on a 'preset course' and stressed that future interest rate decisions would be 'based solely on [officials'] assessment of the data and its implications for the economic outlook and the balance of risks.'
Following Powell's remarks, CME Group's FedWatch Tool is currently indicating an 83.1 percent chance the Fed will lower rates by a quarter point next month, up from 75.0 percent on Thursday.
'Jerome Powell's comments today were more dovish, than many, including myself expected,' said Larry Tentarelli, Chief Technical Strategist for Blue Chip Daily Trend Report.
He added, 'Our view is to expect a September rate cut and sectors that should benefit the most include home construction, small caps and banks.'
Sector News
Airline stocks turned in some of the market's best performances on the day, with the NYSE Arca Airline Index soaring by 5.7 percent to its best intraday level in nearly six months.
Substantial strength was also visible among oil service stocks, as reflected by the 5.1 percent spike by the Philadelphia Oil Service Index. With the surge, the index reached a four-month closing high.
Housing stocks also showed a particularly strong move to the upside, driving the Philadelphia Housing Sector Index up by 4.5 percent to its best closing level of the year.
Networking, steel and computer hardware stocks also saw significant strength, moving higher along with most of the other major sectors.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance on Friday. China's Shanghai Composite Index jumped by 1.5 percent and Japan's Nikkei 225 Index inched up by 0.1 percent, while Australia's S&P/ASX 200 Index slid by 0.6 percent.
Meanwhile, the major European markets all moved to the upside on the day. While the French CAC 40 Index climbed by 0.4 percent, the German DAX Index rose by 0.3 percent and the U.K.'s FTSE 100 Index inched up by 0.1 percent.
In the bond market, treasuries moved sharply higher in reaction to Powell's speech. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slumped 7.0 basis points to 4.260 percent.
Looking Ahead
Earnings news from market leader Nvidia (NVDA) is likely to be in focus next week, while traders are also likely to keep an eye on reports on new home sales, durable goods orders, consumer confidence, second quarter GDP and consumer price inflation.
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