Jerome Powell, the new Chair of the Federal Reserve, gave a market-moving speech at the annual central banker’s retreat in Jackson Hole, Wyoming this past Friday. His comments sparked one of the largest one-day stock market rallies in history. During his speech, Powell signaled a willingness to cut interest rates, which boosted investor optimism and sent stock prices soaring.
Powell reiterated that the Fed will “move ahead carefully” as it continues to steer the economy through turbulent waters. He acknowledged that the Fed finds itself in a tough spot. Specifically, he called out the impact of a hiring freeze going on concurrently with cost inflation due to tariffs. These mounting worries have caused some to call for changes in the course of monetary policy.
“The shifting balance of risks may warrant adjusting our policy stance,” Powell stated, reflecting his cautious approach toward potential changes in interest rates. Investors cheered this message, driving the CME FedWatch Tool to show a sledgehammer of bullish market sentiment. The probability of a quarter-point interest rate cut soared to 91%, compared to only 75% probability as calculated just one day prior.
Immediately after Powell’s speech, the stock market surged. The Dow Jones Industrial Average closed 846 points higher, or up 1.8%. The S&P 500 jumped by 1.5%, and the tech-heavy Nasdaq was up by 1.8%. Sunset on tech Notably, some of the largest technology stocks, including blacklisted Chinese businesses, were among the biggest winners Friday.
Now, in spite of the surging market reaction, Powell strongly cautioned against over-enthusiasm about the state of the U.S. economy. His remarks came amid ongoing pressures from President Donald Trump, who has been vocal in urging the Fed to lower interest rates to bolster economic performance and reduce government debt interest payments.
