S&P 500 posted its best gain since Ma, Dow has first record of the year: Powell inspired the market

The main U.S. index S&P 500 jumped 1.5%, showing the best growth for the day since Ma. And the Dow Jones blue-chip index was able to renew its record at the closing for the first time this year. Securities of small-capitalization companies rose by 4%. Bitcoin rose by the same amount, and Ethereum soared by 15% at once and set a new record. Fed Chairman Jerome Powell helped the markets end a generally depressing week on such a positive note: even a hint of a possible rate cut was enough for the rally.

- S&P 500 rose by 1.52% at the end of trading on Friday, August 22 - up to 6466.91 points. This was the best growth of the index for the day since Ma, noted Bloomberg. Nevertheless, the S&P 500 remained below its record levels - both at the close and for the entire trading time.

- The Dow Jones Industrial Average rose by 1.89% (or 846 points). The index hit a record closing high of 45,631.74 for the first time since December 2024. Since January, the Dow Jones has hit new highs several times during trading (and on August 22, too), but it did so at the close for the first time this year.

- The Nasdaq Composite index, heavily weighted toward technology companies, added 1.88% on the day thanks to a rally by a number of tech companies.

- The Russell 2000 small-cap index jumped 3.86%. Smaller companies will benefit the most from a possible decrease in interest rates, as they are more dependent on borrowed capital.

- "In contrast, Wall Street's VIX"fear index" has lost 14% (or two points) and now stands at 14.22 points.

- Cryptocurrencies have risen sharply. The main one - bitcoin - added about 4%, and the second in capitalization Ethereum - 15% at once, CoinGecko shows. According to CNBC, Ethereum during trading for the first time since November 2021 updated the all-time trading record - reached at the moment $4885.

- Nvidia 's stock rose 1.7%, Meta shares added more than 2%, Amazon gained more than 3%, and Tesla gained about 6%.

- Shares of Alphabet (Google's holding company) rose 3.2%, while Apple 's rose 1.3%. Bloomberg sources said Apple is in talks with Google to add Google Gemini artificial intelligence capabilities to Apple's Siri voice assistant. In this way, Apple is trying to catch up with its lag in AI, the agency noted.

- A total of 12 stocks in the S&P 500 hit their highest level in the past 52 weeks, CNBC noted. Among them, for example, card payment operator MasterCard and defense company Northrop Grumman.

Technology stocks were down for the week as investors feared that U.S. Federal Reserve Chairman Jerome Powell's speech at a symposium in Jackson Hole would prove hawkish.

However, Powell's speech was much stronger in signaling an impending easing of monetary policy than investors had expected, Bloomberg noted. Powell admitted that the regulator may need to "adjust its stance" in terms of monetary policy.

"Our key rate is now 100 basis points closer to neutral than it was a year ago, and the stability in the unemployment rate and other labor market indicators allows us to proceed cautiously when considering changes in our policy stance. Nevertheless, with policy remaining in restrictive territory, the baseline outlook and the evolving balance of risks may require adjustments to our stance," the Fed chief said.

The Fed chief's speech was much softer than the market had feared, notes Evercore ISI strategist Krishna Guha. "Powell opened the door wide for a rate cut in September with his Jackson Hole speech, sending a clear and strong signal that the Fed is ready to cut rates by 25 basis points at this meeting," he said.

There's one more jobs report ahead before the September meeting, but it's unlikely to derail the Fed, said Abound Financial Chief Investment Officer David Lauth. "The stock market typically views lower interest rates favorably, and with Powell hinting at a high probability of a September cut, we expect the bullish trend in the market to continue in the short term," Lauth said.

"We thought a rebound was likely, but today's trading has definitely gone beyond a mere bounce. Therefore, we tend to respect that momentum and, as long as the S&P 500 holds above around 6400, temporarily postpone our cautious view [of the market]," wrote BTIG managing director Jonathan Krinsky, a note cited by Barron's.

While the speech was clearly soft, Powell's statements indicate that a 25 basis point cut is justified, but a 50 basis point cut is not, explains Principal Asset Management strategist Xiima Shah. "Certainly the case for policy easing has strengthened, but there is virtually no economic justification for an extraordinary rate cut of 50 basis points at once," she said in a Bloomberg commentary. - If the Fed decides to take such a step, markets may see it as a sign of political pressure rather than a data-driven decision." That could push up inflation expectations and bond-maturity premiums, pushing up yields on long-dated bonds and undermining the conditions that have supported risky assets, she said.

According to eToro strategist Brett Kenwell, the Fed is in a tricky situation: inflation is accelerating again and the labor market is starting to weaken. "Cut rates too much or too soon - there is a risk of spurring inflation. Lower them too late or too Ma - risk exacerbating the slump in the labor market, and thus the economy. It's this delicate balance that makes the Fed's position so difficult," he told Bloomberg.

"If the next labor market or inflation (CPI) reports come in above expectations, Powell will be able to take a tougher stance without losing credibility. But going against the market now would create a serious risk if August data turns out to be weak," TradeStation analyst David Russell explained Powell's soft rhetoric to Bloomberg.

This article was AI-translated and verified by a human editor