In perhaps his most optimistic speech in months, Federal Reserve Chairman Powell suggested it was probably appropriate to start cutting interest rates, according to prepared testimony released at the Kansas City Fed’s symposium in Jackson Hole, Wyoming.
“It is time to adjust policy. The direction is clear and the timing and pace of rate cuts will depend on upcoming data, the evolving outlook and the allocation of risks,” he said.
Breaking news
Stocks close a successful week thanks to Powell
The Dow Jones and S&P 500 closed just below their record highs, while the Nasdaq Composite gained more than 1%. Investors celebrated the confirmation by Fed Chairman Jerome Powell, who said “the time has come” and the first interest rate hike was on the cards since central bankers began their aggressive rate-hiking campaign in the spring of 2002.
All three major US benchmarks closed the week with gains.
Austin Goolsbee, president of the Federal Reserve Bank of Chicago who served under the Obama administration, discusses the course of the interest rate cycle that Powell confirmed on Friday and what could potentially upend it.
Development of history
Dow rises and approaches record close
The Dow Jones Industrial Average rallied on Friday after Federal Reserve Chairman Jerome Powell signaled the time was right for a rate cut, rising more than 500 points before giving back some of its gains.
Dow Jones averages.
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41190.49
Intel, Goldman Sachs and Dow Chemical led the gains, while more defensive names P&G, Walmart and Merck lagged.
| symbol | Price | Change | %Change |
|---|---|---|---|
| INTC | $20.70 | 0.60 | 3.01 |
| GS | $509.03 | 11.28 | 2.27 |
| DOW | $53.78 | 1.23 | 2.33 |
| PG | $169.05 | -1.10 | -0.65 |
| WMT | $75.21 | -0.37 | -0.49 |
| MRC | $116.25 | -0.30 | -0.26 |
Development of history
Stock prices rise after Powell’s speech
The Nasdaq Composite supported the rise in U.S. stocks after Fed Chairman Jerome Powell signaled that the “time has come” to start cutting interest rates.
Nasdaq Index.
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17905.993466
Nvidia, Apple and Amazon helped accelerate gains in the technology-heavy benchmark.
| symbol | Price | Change | %Change |
|---|---|---|---|
| NVDA | $128.52 | 4.78 | 3.86 |
| AAPL | $227.77 | 3.24 | 1.44 |
| Amazon | $178.03 | 1.91 | 1.08 |
Mortgage relief on the way?
If the Federal Reserve begins its easing cycle in September, as many market participants expect, that could push already falling mortgage rates even lower. The average interest rate on a 30-year fixed-rate mortgage is below 7%.
Development of history
Powell speech – What you should know
Federal Reserve Chairman Jerome Powell has a lot riding on his speech on Friday in Jackson Hole, Wyoming, as he has the chance to silence critics who say the Fed failed when it missed the chance to cut interest rates last month.
Controversy over jobs
It turns out that the monthly employment numbers that economists and Wall Street rely on so heavily to gauge the health of the U.S. economy and labor market are not as rosy as previously thought.
