FX.co ★ U.S. Stocks Holding On To Notable Gains Following Early Rally

**Market Recap: Stocks Surge Following Federal Reserve Announcement**

Stocks experienced a sharp upward movement early in the session and maintained strong performance during Friday afternoon trading. Although the major indices slightly retreated from their session highs, they remained solidly in positive territory.

In recent trading, the major averages have been relatively stable, holding onto significant gains. As it stands, the Dow has increased by 297.52 points, or 0.7%, reaching 41,010.30. The Nasdaq has risen by 153.39 points, or 0.9%, to 17,772.74. The S&P 500 has advanced by 36.73 points, or 0.7%, landing at 5,607.37.

### Factors Driving Market Strength

The rally on Wall Street is largely attributed to remarks by Federal Reserve Chair Jerome Powell, which aligned with expectations that the central bank is prepared to lower interest rates.

“The time has come for policy to adjust,” Powell stated at the Jackson Hole Economic Symposium. However, he emphasized that the "timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

Powell's comments stem from a growing confidence that inflation is on a sustainable path back to the 2% target. Federal Reserve officials have consistently indicated that they need "greater confidence" in inflation’s trajectory towards the 2% target before contemplating rate cuts. Powell highlighted that inflation is now closer to this objective, with consumer prices rising 2.5% year-over-year in July, demonstrating renewed progress after a previous stagnation.

### Upcoming Rate Cuts Expected

Recent inflation data has bolstered expectations that the Fed will cut interest rates in their next monetary policy meeting in September. According to Mike Fratantoni, MBA SVP and Chief Economist, "Chair Powell just rang the bell to start rate cuts." He noted that while incoming data will influence the pace, a rate cut is imminent in September, marking the first in a series that should significantly lower the federal funds target over the next 18 months.

CME Group’s FedWatch Tool indicates a 65.5% probability of a quarter-point rate cut at the September 17-18 meeting, with a 34.5% chance of a half-point rate cut. Minutes from the Fed's late July meeting revealed that a "vast majority" of participants deemed it "likely appropriate" to lower rates if inflation data met expectations.

### U.S. Economic News

A report from the Commerce Department showed substantial growth in new home sales for July. New home sales surged by 10.6%, reaching an annual rate of 739,000, up from June’s upwardly revised rate of 668,000. Economists had anticipated a 2.1% increase to an annual rate of 630,000 from the initially reported 617,000 for June. This surge marks the highest annual rate since May 2023.

### Sector Overview

- **Airline Stocks:** The NYSE Arca Airline Index jumped by 3.4%.

- **Oil Service Stocks:** The Philadelphia Oil Service Index spiked by 3.3%, driven by a significant rise in crude oil prices.

- **Housing Stocks:** The Philadelphia Housing Sector Index soared by 3.2%, fueled by optimism about lower interest rates and positive reaction to the spike in new home sales.

- **Other Sectors:** Telecom, networking, and banking stocks also showed notable strength, reflecting the bullish sentiment across most major sectors.

### Global Markets

In international markets, Asia-Pacific stock performances were mixed on Friday. Japan’s Nikkei 225 Index rose by 0.4%, while Hong Kong's Hang Seng Index fell by 0.2%. European markets posted gains, with the U.K.’s FTSE 100 Index climbing by 0.5%, and France's CAC 40 Index and Germany’s DAX Index increasing by 0.7% and 0.8%, respectively.

### Bond Market

Treasuries moved higher in response to Powell’s speech, causing the yield on the benchmark ten-year note to drop by 4.4 basis points to 3.818%.

In summary, the market's robust performance on Friday was significantly influenced by the Federal Reserve’s indications towards forthcoming interest rate cuts, buoyed by encouraging inflation data and strong new home sales figures.