Fed Chairman Jerome Powell sent the strongest signal yet of a rate cut, saying he intends to take action to avoid further weakness in the U.S. labor market. Interest rate futures traders expect the probability of a 50 basis point rate cut by the Fed in September to be about 33%, an increase from before Powell's speech.
"We do not seek or welcome a further cooling of labor market conditions. Now is the time to adjust policy," Powell said.
Nick Timiraos, the "Federal Reserve mouthpiece," posted on social media that today's speech showed that Powell's policy shift had been completed. Powell showed an overall dovish stance in his speech. Two years ago, he also said at the same time that the Federal Reserve would accept a recession as the price of restoring inflation.
Market reaction
stock market
Stocks rose on Friday after Federal Reserve Chairman Jerome Powell indicated a rate cut was imminent.
The Dow Jones Industrial Average rose more than 300 points, or 0.99%, while the S&P 500 rose 0.9% and the Nasdaq Composite rose 1.4% as technology stocks outperformed.
Stocks rallied after Powell hinted at future rate cuts in a speech in Jackson Hole, Wyoming, but he did not provide specifics on when or by how much those cuts would come.
"Now is the time for a policy adjustment," Powell said at the Fed's annual meeting. "The way forward is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."
That pleased traders, who were unanimous in betting that the Fed would cut rates at its September meeting, according to CME Group’s FedWatch data. But views were divided on how much.
Technology stocks gained momentum as investors became increasingly confident that the low interest rate environment would benefit the sector. Nvidia and Tesla both rose more than 4%, while AMD rose more than 2%.
Small-cap stocks also surged on the outlook, with the Russell 2000 up about 2%.
Although rising Treasury yields on Thursday put some pressure on the three major indexes, the three major indexes are still expected to rise this week. The S&P 500 and Nasdaq rose about 1.2% and 1.3% respectively this week, while the Dow Jones Industrial Average rose 0.9%.
Bitcoin
Bitcoin rose by $900 in the short term, reaching $62,000 per coin. It is now trading at $61,784.37 per coin, up 2.38% on the day.
