On Friday, Wall Street’s stock indexes experienced significant gains, with the benchmark S&P 500 index coming close to a record high following Federal Reserve Chair Jerome Powell’s announcement that it was time to decrease interest rates. Powell, speaking at the annual Jackson Hole economic conference, cited risks in the job market and inflation approaching the Fed’s 2% target as reasons for the imminent policy easing. The Dow Jones Industrial Average rose by 460 points, or 1.1%, to 41,173, while the S&P 500 and Nasdaq also saw increases of 1% and 1.3%, respectively.
The S&P 500 was on track for its second week of gains, with the index extending early gains and coming close to surpassing a record high set in July. Megacap growth companies like Meta and Amazon saw a 1% increase, while chip stocks such as Nvidia and Broadcom rose over 3%, leading to gains in the technology sector. All S&P 500 sectors advanced, with technology stocks leading the way and the Philadelphia chip index also experiencing a 2.2% increase.
Atlanta Fed President Raphael Bostic announced that the Fed is close to being in a position to lower its benchmark interest rate, with traders predicting a 71.5% chance of a 25 basis point rate cut at the upcoming Fed meeting in September. Despite previous disappointments in rate cuts, investors remained optimistic about the potential cut, with Sam Stovall, chief investment strategist at CFRA Research, believing that the Fed would not make an aggressive 50-basis point cut at once. Recent economic data suggested a gradual slowing of the US economy, alleviating concerns over a sharp downturn.
Wall Street’s recovery from a previous plunge earlier in the month was attributed to a better-than-expected economic outlook, as indicated by minutes from the Fed’s July meeting showing preparedness for rate cuts in September. This recovery was also fueled by positive news from companies like Workday, which saw a significant 11% increase in shares after surpassing second-quarter revenue expectations and announcing a stock buyback plan. Similarly, Cruise, backed by General Motors, announced plans to offer autonomous vehicles on Uber’s ride-hailing platform starting next year, leading to a 2.2% increase in GM’s shares.
In addition, Ross Stores saw a gain of 3.8% after raising its fiscal 2024 profit forecast. Overall, Wall Street’s positive performance on Friday was driven by optimism surrounding potential Fed interest rate cuts, positive economic data signaling a gradual slowdown rather than a sharp downturn, strong performances from key technology and chip companies, and positive news from individual companies like Workday and Cruise. Traders remained hopeful for a probable rate cut in the upcoming Fed meeting in September, enhancing overall market confidence and contributing to gains across various sectors on Wall Street.
