Those all-time highs from July are much closer now after Fed Chair Jay Powell shifted the idea of a rate cut from speculation to almost a certainty at the central bank’s September meeting.
In anticipation of the looming cut, Wall Street finished the week strongly and looks set to continue the momentum this week. The nerves and dire warnings about the early-month sell-off—driven not by U.S. factors but by events in Japan—seem to have been forgotten.
The Dow climbed 462.30 points, or 1.14%, to 41,175.08. The Nasdaq added 1.47%, ending the week at 17,877.79, and the S&P 500 was up 1.15% at 5,634.61, with a new record high within reach after another day or two of gains.
Friday’s gains ensured that the three major averages had a winning week. The Dow surged nearly 1.3%, the Nasdaq added 1.4%, and the S&P 500 jumped 1.45%.
‘The time has come for policy to adjust,’ Powell said during the Fed’s annual Jackson Hole conference. ‘The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.’
Technology stocks rallied with particular strength as investors grew hopeful that a lower-rate environment would benefit this sector. Tesla and Nvidia both leapt more than 4%.
For the ASX, the futures platform was showing a 41-point gain at the start of trading, which will more than offset Friday’s first down session in the last ten days. The strong performance in European and U.S. markets on Friday, following Powell’s comments, is likely to influence markets across Asia, starting with New Zealand, Australia, and Japan.
Europe’s STOXX 600 index rose 0.46% on Friday and 1.3% for the week. The Nikkei in Tokyo was up 0.4% on Friday and 0.8% for the week, with futures trading indicating a solid gain this morning. In Australia, the ASX 200 dipped 3.1 points to 8,023.9 but was still up 0.7% for the week.
ANZ shares fell 2.2% after the banking regulator, APRA, announced that the bank will be required to hold an additional $250 million in capital in reserve against its risk-weighted assets. That brings the total penalty overlays to $750 million. It will be important to watch ANZ to see if there are any board or management changes, as the regulator is clearly not happy with the bank.