Friday saw a record-breaking surge in U.S. stocks as the chairman of the Federal Reserve finally confirmed what Wall Street has been expecting for some time; interest rate cuts to support the economy will soon come.
Following Fed Chair Jerome Powell's much-awaited announcement that it is time to reduce the main interest rate from a two-decade high, the S&P 500 increased by 1.1 per cent.
S&P 500 |
The index recovered almost all of its losses from a brief but alarming summertime decline, and it is now within 0.6 per cent of its all-time high set last month.
The Nasdaq composite increased 1.5 per cent, while the Dow Jones Industrial Average increased 462 points, or 1.1 per cent, to close above the 41,000 mark for the first time since it set its own record in July.
The Dow jones industrial average saw a 500-point rally on August 23, 2024. The 'Jackson Hole Economic Policy Symposium' where Federal Reserve chairman 'Jerome Powell' was scheduled to speak on whether there will be a rate cut in the interest rate in the September meeting.
The Dow jones industrial average saw the morning trade open at 40,879.12 points, The optimism from Federal Reserve chairman Jerome Powell's scheduled address about possible interest cut led the Dow jones Industrial Average to day-high level of 41,207.92 points.
The Nasdaq composite opened at 17,772.73 points on the US bourse. Expecting a good comment from Federal Reserve chairman 'Jerome Powell', the index touched a day-high of 17,941.27 points in the opening hour of Wall Street.
Nasdaq composite |
The closing bell for the Nasdaq Composite rang at 17,877.79 points. The index has recorded a 52-week high at 18,671.07 points. The index saw 258.44 points run in the green territory.
Jerome Powell's speech
Powell's speech signalled a dramatic change in direction for the Fed, which had started raising rates two years prior as inflation reached record highs. The Fed wanted to drive up borrowing costs for American consumers and businesses to the point where it stunted inflation and slowed the economy.
Powell used the past tense to characterise many of the factors that caused inflation to soar following the pandemic, such as a labour market that "is no longer overheated," while being cautious to emphasise that the task is not finished.
This implies that the Fed can focus more on one of its dual responsibilities, which is to support a slowing economy that has so far escaped many forecasts of a recession.
