The Dow Jones Industrial Average marked a record close on Friday, its first in 2025. Small-cap stocks and Treasuries also rallied, as investors got the clearest indication yet from Federal Reserve Chair Jerome Powell that the central bank could cut interest rates in September.
The Dow rose 846 points, or 1.9%, while the S&P 500 gained 1.5% and the Nasdaq Composite climbed 1.9% higher.
The S&P 500’s strong performance came after a five-day losing streak. “We thought a bounce was likely, but today’s action is certainly more than a bounce. We will therefore respect this action and as long as SPX remains above ~6400, put our cautious view on the back burner for now,” wrote Jonathan Krinsky, Managing Director and Chief Market Technician at BTIG.
The gains were triggered after Federal Reserve Chair Jerome Powell spoke Friday morning at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyo. In his remarks, Powell downplayed inflation risks while emphasizing the softness in the labor market.
Powell’s remarks also solidified expectations that the Fed will cut interest rates by a quarter-point when the central bank’s policymaking arm meets Sept. 16-17. Lower interest rates make it cheaper for companies to borrow money, hire more workers, and take on riskier endeavors for growth–but they can simultaneously boost prices of goods and services, especially amid aggressive tariffs.
Stock investors, though, are known to be short-sighted and are likely enthusiastic about the potential for earnings, especially for growth stocks.
Market enthusiasm also boosted smaller stocks, with the Russell 2000 Index rising nearly 4% on Friday.
Treasuries also rallied as yields fell. The yields on the 10-year and 2-year Treasury notes fell to 4.258% and 3.689%, respectively. Prices and yields move in opposite directions.
The U.S. dollar fell nearly a percent. Its performance was unsurprising: a nation’s currency typically falls on indications of lower interest rates, since it suggests foreign investors will look for more attractive rates elsewhere.
The VIX, or the so-called fear gauge for Wall Street, closed at its lowest level for 2025—signaling low levels of uncertainty in the market.
Overall, Friday was a fantastic day for markets but one that’ll be hard to replicate. Markets have fully discounted a would-be rate cut in September, and considerations for deeper cuts through 2025 look optimistic.
Next week, the U.S. Treasury will host auctions for the 2-year, 5-year, and 7-year notes. Investors will also be able to parse the U.S durable goods orders report and the latest consumer confidence numbers.
Corrections & Amplifications: The S&P 500 finished 0.03% off from a record close. An earlier version of this article incorrectly said it marked a new closing high.
