US stocks end week with huge gains after Powell hints at interest rate cut

ISTANBUL

The New York Stock Exchange ended Friday on a high note after Fed Chair Jerome Powell cautiously signaled a possible rate cut at a September meeting.

The Dow rose 1.89%, or 846.24 points, to close at 45,631.74.

The Nasdaq soared 1.88%, or 396.2 points, to close at 21,496.53. The S&P 500 added 1.52%, or 96.74 points, to 6,466.91.

The Volatility Index (VIX), also known as the “fear index," dropped 14.34% to 14.22.

Powell opened the door to interest rate cuts at the Jackson Hole Economic Policy Symposium. “With policy in restrictive territory, the baseline outlook and shifting balance of risks may warrant adjusting our policy stance,” he said.

Powell noted that in the short term, risks to inflation are tilted to the upside, while employment risks are tilted to the downside.

Reiterating that monetary policy is not on a predetermined path, Powell emphasized that Federal Open Market Committee (FOMC) members will make decisions based solely on the data and their effect on the economic outlook and risk balance.

Following the remarks, pricing in the money markets showed expectations of a 25-basis point rate cut at the Fed's Sept.16-17 meeting had strengthened.

While other statements by other Fed officials were also monitored, Cleveland Fed President Beth Hammack said she would be hesitant to lower rates as long as the threat of inflation persisted.

“We’ve been above our (inflation) target for four years, and we need to get that under control. So, to me, we need to maintain a modestly restrictive stance of policy to get inflation back to target," she said.

Boston Fed President Susan Collins also noted that the next step to be taken at the meeting has not yet been finalized and the current policy is moderately restrictive. "At the moment, monetary policy is kind of modestly restricted. That’s actually appropriate for a period when inflation is elevated," she said.

Shares of Intel were up 5.5% after US President Donald Trump announced that the company had agreed to give the government a 10% stake.