It’s been a long wait but Federal Reserve chair Jerome Powell energized stocks today as he cracked open the door to a possible interest rate cut at the Central Bank’s September meeting.
In his keynote address at the Fed’s annual economic symposium in Jackson Hole, Powell said that “the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.” The Fed hasn’t cut rates since December of 2024.
The Dow Jones Industrial Average surged 800 points or 1.9% to close at a record. The S&P 500 gained 1.5% and the 1.9%. It was an upbeat finale to a dour week rattled AI jitters that pounded tech stocks. They rallied today along with media. Warner Bros. Discovery rose 4%. Disney and Comcast closed up 2%.
Netflix was a hair lower. Paramount Skydance slipped as well after a massive run-up approaching meme stock status over the past few weeks. Deadline reported this afternoon that the newly merged company is planning thousands of layoffs.
Exhibitors rose nicely led by AMC and Imax. Broadcasters posted gains amid M&A as Nexstar (up 1%) bid to acquire Tegna (flat). Charter, in the process of buying Cox, was up 4%.
Amazon, Apple and Meta rose. Roku gained as shares from Sirius to Snap to Fubo.
The Fed’s dual mandate is price stability and maximum employment. That’s been a major challenge as inflation went wild post-Covid and it took rate hike after hike to wrestle down toward the central bank’s traditional 2% benchmark. Powell said inflation risk is still “tilted to the upside” with tariff related price impacts now “clearly visible.”
“We expect those effects to accumulate over coming months, with high uncertainty about timing and amounts. The question that matters for monetary policy is whether these price increases are likely to materially raise the risk of an ongoing inflation problem,” he said.
However, the labor market is seeing “a marked slowing in both the supply of and demand for workers,” he said.
He called it an unusual situation which “suggests that downside risks to employment are rising” and that “the balance of risks appears to be shifting.”
There’s been a lot of noise around U.S. economic indicators. President Donald Trump fired the Bureau of Labor Statistics Commissioner late last month after the agency reported that job growth in the U.S. had slowed to a near halt.
The president also wants lower interest rates and has publicly lambasted Powell, frequently threatening to eject the chairman before his term ends next spring. Markets don’t react well when he does that so he’s always backed down.
Trump is, however, calling for the resignation of Fed Board of Governors member Lisa Cook. Trump loyalist Bill Pulte, director of the Federal Housing Finance Agency, said his office found that she appeared to have falsified bank documents to obtain favorable terms on a mortgage — a controversy that is hanging over the Jackson Hole event.
