Stocks Surge as Fed Confirms Rate Cut Plans

U.S. stocks saw a significant rally on Friday following dovish comments from Federal Reserve Chair Jerome Powell, who indicated a likely rate cut in September. The announcement drove major stock indexes higher, with financials and regional banks outperforming. Investors now await further economic data ahead of the Fed's September meeting.

U.S. stocks rallied on Friday as dovish remarks from U.S. Federal Reserve Chair Jerome Powell solidified expectations of a key policy rate cut in September. In highly anticipated comments at the Jackson Hole Economic Symposium, Powell stated the time is ripe to lower the Fed funds target rate, noting the diminished risks of inflation.

"We do not see or welcome further weakening in labor market conditions," Powell added, signaling an almost certain rate cut at next month's policy meeting, the first in over four years. "The long wait is over," said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska. "This was the dovish shift that market participants have been waiting for."

Powell's prepared remarks spurred a jump in all three major U.S. stock indexes, led by megacap growth stocks. Small caps and regional banks notably outperformed the broader market. "Financials are at an all-time high, driven by regional banks," Detrick noted. "Signs of a major calamity or recession are absent given their strong performance."

All three indexes logged weekly advances, bolstered by last week's largest Friday-to-Friday percentage gains of the year. In the coming week, the data-dependent Fed will review various economic indicators, including the Commerce Department's revised second-quarter GDP and the broad-ranging Personal Consumption Expenditures (PCE) report, which features the Fed's preferred inflation measure, the PCE price index.

Preliminary data shows the S&P 500 gained 62.79 points (1.13%) to 5,633.43, while the Nasdaq Composite rose 258.44 points (1.47%) to 17,877.17. The Dow Jones Industrial Average added 462.76 points (1.14%) to 41,168.47. Workday exceeded quarterly revenue expectations and unveiled a $1 billion stock buyback plan, boosting its shares. Ross Stores also advanced after raising its fiscal 2024 profit forecast, while TurboTax's parent Intuit saw a decline on disappointing revenue figures.

(With inputs from agencies.)