Stocks Surge as Powell Signals Potential September Rate Cut

U.S. stock markets experienced a significant rally on Friday after Federal Reserve Chair Jerome Powell suggested the possibility of an interest rate cut at the upcoming September meeting.

The Dow Jones Industrial Average rose 2.02% to a record 45,688.25, while the S&P 500 climbed 1.63% to 6,473.70. The Nasdaq Composite increased by 1.96% to 21,513.72.

Industrial and financial sectors led the gains. Construction equipment manufacturer Caterpillar and investment bank Goldman Sachs each saw their shares rise approximately 4%, as both are expected to benefit from the stimulative effects of lower interest rates.

Homebuilders also experienced significant gains, with PulteGroup, D.R. Horton, and Lennar each rising more than 5%. Lower interest rates are anticipated to reduce mortgage costs, potentially revitalizing the housing market.

Small-cap stocks, which are more sensitive to interest rate changes, outperformed, with the Russell 2000 index rising nearly 4% to its highest level of 2025.

Powell's remarks at the Jackson Hole conference highlighted a "curious balance" in the labor market, with declining supply and demand for workers, and emphasized shifting risks that may require policy adjustments.

Market analysts interpreted Powell's speech as unexpectedly dovish, suggesting a 25 basis-point cut is likely, with some seeing potential for additional cuts by year-end.

The Federal Reserve's next policy meeting is scheduled for September 16-17, where further decisions regarding interest rates will be made.