U.S. stocks ended sharply higher on Friday, with the Dow hitting an all-time closing high, as investors’ sentiment got a boost after Federal Reserve Chairman Jerome Powell suggested that the central bank could start cutting interest rates from next month. All three major indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) jumped 1.9% or 846.24 points, to finish at an all-time closing high of 45,631.74 points, after surpassing its last record close on Dec. 4, 2024.
The S&P 500 gained 1.5%, or 96.74 points, to end at 6,466.91 points. Consumer discretionary, energy, materials and financial stocks were the biggest gainers.
The Consumer Discretionary Select Sector SPDR (XLY) rallied 3%. The Financials Select Sector SPDR (XLF) and the Energy Select Sector SPDR (XLE) gained 1.7% and 2%, respectively. The Materials Select Sector SPDR (XLB) also rose 2%. Ten of the 11 sectors of the benchmark index ended in positive territory, with the Consumer Staples Select Sector SPDR (XLP) remaining stagnant.
The tech-heavy Nasdaq rose 1.9%, or 396.22 points, to close at 21,496.54 points.
The fear gauge CBOE Volatility Index (VIX) was down 14.34% to 14.22. Advancers outnumbered decliners on the NYSE by a 9.43-to-1 ratio. On the NYSE, there were 590 new highs and 42 new lows.
On the Nasdaq, there were 166 new highs and 47 new lows. A total of 17.93 billion shares were traded on Friday, higher than the last 20-session average of 17.08 billion.
Powell Hints at Rate Cuts, Stocks Rally
Powell finally suggested on Friday that the Federal Reserve could ease its monetary policy next month. Powell’s comments came at the central bank’s annual conclave in Jackson Hole, Wyoming, where he said that “the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
Powell added, “the balance of risks appears to be shifting” between the central bank’s two goals of maximum employment and price stability, adding that the jobs and inflation data were thus important before going for a rate cut in September.
This gave a major boost to investors’ sentiment, with expectations of a 25 basis-point rate cut in September soaring after Powell’s comments. Markets are now pricing in a 90% chance of a quarter percentage point rate cut next month, up from 75% earlier in the week, according to the CME Group’s FedWatch Tool.
Tech stocks rallied soon after Powell’s comments. Shares of Tesla, Inc. (TSLA) jumped 6.2%, while Amazon.com, Inc. (AMZN) and Alphabet, Inc. (GOOGL) ended 3.1% and 3.2%, respectively. Amazon has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
S&P 500 Ends Five-Day Losing Streak
Ten of the 11 sub-sectors of the S&P 500 ended in positive territory, with the broader index snapping its five-day losing streak following a massive megacap selloff in tech stocks earlier in the week.
However, the index recovered most of the week’s losses.
No major economic data was released on Friday.
Weekly Roundup
For the week, the Dow gained 1.5%. The S&P 500 and Nasdaq were 0.3% and 0.6% higher, respectively, for the week.
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Amazon.com, Inc. (AMZN): Free Stock Analysis Report Tesla, Inc. (TSLA): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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