Stocks rose on Friday as Federal Reserve Chair Jerome Powell indicated that interest rate cuts are on the horizon. The Dow, S&P 500, and Nasdaq all closed higher for the week, with the Dow up 1.1%, the S&P 500 up 1.2%, and the Nasdaq up 1.5%. Powell emphasized the need for policy adjustments and mentioned that the labor market has cooled enough not to pressure inflation higher. He also mentioned that the central bank does not want to see further weakening in job market conditions. This has led to speculation about whether the rate cut in September will be a one-time event or the start of a more significant cutting cycle.
Minutes from the Fed’s July meeting revealed that the majority of the Federal Open Market Committee would support rate cuts in September if inflation continues to slow down. They emphasized the importance of being data-dependent and not following a preset path. Concerns were raised about the labor market weakening significantly if policy remains restrictive for too long. Recent data showing slower job growth and cooling inflation has fueled expectations for rate cuts in September, November, and December. However, some investors believe a half-point cut is unlikely given the current economic data.
Fears of an economic downturn have eased since a weak July jobs report caused market turbulence earlier in August. Stocks have recovered from the global market rout, showing optimism for a soft landing scenario where inflation is brought down without causing a recession. Growth is slowing, but not yet slow enough to indicate a recession, according to analysts. Gold futures hit a record high price this week before dropping, while sales of previously owned homes in the US rose 1.3% last month after four consecutive months of declines.
In company news, Target shares surged by 10% after reporting strong quarterly profits, while Macy’s shares fell 9.8% due to a drop in sales and reduced full-year revenue guidance. Boeing shares declined by 2.8% after issues were discovered in a structural component of its 777X aircraft during a test flight, adding to the company’s ongoing problems after safety concerns earlier in the year. As the trading day ended, stock levels may have changed slightly. The market is closely watching for further economic data and developments that could impact future rate cuts and market conditions.
