Investors waited all week for Fed Chairman Jerome Powell to take the stage in Jackson Hole, Wyo., and share the central bank's view on the U.S. economy. In his 21-minute speech this morning, Powell warned that upside risks to inflation and downside risks to employment are increasingly weighing on the central bank.
He then suggested that the current environment "may warrant" a rate cut, without elaborating on what awaits at the Fed's September meeting (or subsequent meetings through year-end). That might have been disappointing for some investors, who were hoping for guidance on where rates might go from here, but it was enough for most. Once he shared that bit, what followed could only be described as a Power Hour.
Actually, maybe POWer hours, plural. Stocks are at session highs, with the Russell 2000 (+3.83%), the Nasdaq (+2.02%), Dow (+1.99%), and S&P 500 (+1.64%) soaring on his words. Crypto assets like bitcoin and ethereum also jumped, pushing the total crypto market cap back above $4 trillion. And precious metals like silver (+2.55%) and gold (+1.17%) rose too, making clear investors' desire to hedge against potential inflation.
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On the bond side, the yield curve began to reflect increased certainty of a September rate cut. In recent days, CME Group's FedWatch had penned the odds at 75%. It's now seen closer to 90%. The two-year (-0.11%), 10-year (-0.086%). and 30-year (-0.057%) Treasury yields fell to 3.679%, 4.246%, and 4.867%, respectively. The U.S. Dollar Index fell nearly 1%, ceding ground to the euro, pound and others.
With Powell's final symposium, and the Tetons, soon to be in the rear view, attention again will turn to economic data. As the Fed seeks to balance the risks of higher inflation and weaker employment, readouts like the Consumer Price Index and Producer Price Index and payrolls will become that much more important in assessing whether a second rate cut is in the cards this year. If today's reaction is any indication, lower rates could mean that even more all-time stock-market highs are just around the corner.
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-- Noah Weidner, markets reporter
