Dow surges 700 points to record high on Fed rate cut hints
Jerome Powell signals policy shift to protect employment, sending Treasury yields tumbling and sparking a broad market rally.
The Dow Jones Industrial Average surged more than 700 points to a fresh record on Friday after Federal Reserve Chair Jerome Powell signaled a potential shift in monetary policy, hinting that interest rate cuts could be on the horizon. The broader market rallied sharply following Powell’s remarks at the central banking symposium in Jackson Hole, Wyoming, where he acknowledged ‘downside risks to employment are rising.’ The Dow jumped 1.6% to close at 45,512.25, while the S&P 500 climbed 1.2% and the Nasdaq Composite gained nearly 1.3%. The move was underpinned by a sharp drop in U.S. Treasury yields, as investors recalibrated expectations for borrowing costs. The 10-year Treasury yield fell 7 basis points to 4.26%.
In his closely watched speech, Powell pointed to a softening labor market, noting that average monthly payroll gains had slowed to just 35,000. He emphasized that while inflation remains a concern, the central bank’s policy was not on a ‘preset course’ and could be adjusted if the economic slowdown accelerates. This pivot away from a singular focus on inflation control toward protecting the U.S. job market was interpreted by investors as a distinctly dovish turn. Markets are now pricing in a 91% chance of a quarter-point interest rate cut at the Fed’s September meeting, according to CME FedWatch data.
Analysts characterized the policy shift as a significant moment for markets. Kyle Chassé, founder of MV Global, described the move as a ‘panic pivot,’ suggesting the Fed is now willing to let inflation run hotter to safeguard jobs. ‘This speech marks the moment the Fed's pivot became undeniable, and smart money is already scrambling to get positioned for the new cycle of liquidity,’ he told Benzinga. The rally capped a volatile week for equities, providing a boost to growth and technology stocks that are sensitive to interest rate expectations. The renewed optimism also spilled into other asset classes, with Bitcoin and Ethereum posting significant gains as investors sought hedges against potential inflation and currency devaluation.