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lite.cnn.com - on gopher - inofficial
ARTICLE VIEW:
Dow soars 800 points and hits record high as Powell hints at rate cut
By John Towfighi, CNN
Updated:
2:01 PM EDT, Mon August 25, 2025
Source: CNN
Stocks surged Friday and the Dow closed at its first record high of the
year after Federal Reserve Chair Jerome Powell could be on the way.
The Dow rose 846 points, or 1.89%, to close at an all-time high of
45,631.74. It’s the Dow’s first closing record high since December
4.
The broader S&P 500 gained 1.52% and the tech-heavy Nasdaq Composite
gained 1.88%. The S&P posted its best day since May and snapped a
five-day losing streak. The Dow also had its best day since May.
Investors across the globe were attuned to Powell’s speech at an
annual central banking forum in Jackson Hole, Wyoming. Markets cheered
his remarks that a shift in interest rate policy may be needed —
though any rate cut would be in response to slowing growth in the labor
market.
“The baseline outlook and the shifting balance of risks may warrant
adjusting our policy stance,” Powell said.
“Downside risks to employment are rising,” he said. “And if those
risks materialize, they can do so quickly in the form of sharply higher
layoffs and rising unemployment.”
Wall Street had expected Powell would be cautious about hinting at rate
cuts, so the signal that the central bank might consider lowering rates
was enough for stocks to take off on a rally.
“Investors are enthusiastic that the Fed will likely resume its
easing cycle next month,” José Torres, senior economist at
Interactive Brokers, said. “Lighter rates are bolstering trader
sentiment and widening the path for a broader rally into year-end.”
The Fed has held its benchmark interest steady since December. A Fed
rate cut would lower savings and borrowing rates, boosting spending and
investing while stimulating business activity, creating a sustained
tailwind for the stock market.
A rate cut can also lower bond yields, making higher-yielding assets
like stocks more appealing for investors.
Powell took a more “dovish” tone than markets were expecting,
according to Krishna Guha, vice chairman at Evercore ISI. A dovish tone
means Powell indicated he’s concerned about the labor market and
growth and potentially ready to lower interest rates to stimulate
economic activity.
“Powell’s dovish Jackson Hole comments suggest the Federal Reserve
is ready to cut interest rates in September, which is just what
investors were hoping to hear, given the recent slowdown in the labor
market,” David Laut, chief investment officer at Abound Financial,
said in an email.
“The stock market tends to favor lower interest rates and since
Powell hinted at the likely prospect of a September cut, we expect the
market’s bullish trend to continue over the short term,” Laut said.
Powell discussed concerns about inflation, which still runs above the
Fed’s target of 2%, but leaned into acknowledging a cut might be
needed to support the labor market.
“Of course, we cannot take the stability of inflation expectations
for granted,” he said. “Come what may, we will not allow a one-time
increase in the price level to become an ongoing inflation problem.”
“Powell threaded the needle perfectly — dovish enough to keep
September cuts alive but disciplined enough to maintain Fed credibility
amid political pressures,” Jayson Bronchetti, CIO at Lincoln
Financial, said in an email. “Investors saw the markets rip higher as
Powell’s commencement style address acknowledged that while inflation
progress has been made, the labor market is cooling faster than
expected.”
Stocks, bonds rally. Volatility drops
Wall Street had been divided on whether Powell would hint at rate cuts
or note that uncertainty about inflation gives credence to a
wait-and-see approach.
Bonds rallied sharply Friday as traders digested Powell’s remarks
that cuts are likely on the way.
“Stocks and bonds knee-jerked to a very happy place when Chair Powell
opened the door to a September rate cut,” Carol Schleif, chief market
strategist at BMO Private Wealth, said in an email.
The 2-year, 10-year and 30-year Treasury yields all fell as investors
snapped up bonds to lock in high rates ahead of a potential Fed rate
cut in September.
Yields and prices trade in opposite directions. If the Fed is expected
to cut rates, investors will snap up bonds to secure the current high
rates, pushing yields lower.
“Fed Chair Powell has clearly opened the door for a 0.25% rate cut
at the September FOMC meeting, largely predicated on the recent cooling
in the labor market,” Chip Hughey, managing director for fixed income
at Truist Advisory Services, said in an email.
Traders are now pricing in an 83% chance the Fed cuts rates in
September, up from a 75% chance before Powell began his remarks.
Meanwhile, Wall Street’s fear gauge, the CBOE Volatility Index, sank
13.8%, signaling relative calm in markets.
The US dollar index, which measures the dollar’s strength against six
major foreign currencies, fell 0.9% on expectations for rate cuts and
signs of slowing economic growth.
Dow clinches record high
The Dow on Friday clinched its first closing record high of the year.
It’s been 177 trading days since the Dow’s last closing record in
December, according to Howard Silverblatt, senior index analyst at S&P
Dow Jones Indices.
It marks the completion of a remarkable recovery for the blue-chip
index. The Dow in April had from its previous peak in December before
clawing back those losses.
The Dow now joins the broader S&P 500 and Nasdaq in notching a record
high this year. The S&P and Nasdaq hit on June 27 and have since
extended their gains into record territory.
“It indicates a broadening out in this rally,” Rob Haworth, senior
investment strategy director at US Bank Asset Management Group, said.
“I think it’s a constructive sign for the economy overall that
you’re starting to see some of the left-behind sectors get into a
positive trend.”
While uncertainty looms over the weakening job market, stock market
investors for now are embracing enthusiasm about robust corporate
earnings and the prospect of a potential Fed rate-cutting cycle.
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