Dow Jones hits record high after Powell’s speech

Today’s headlines

What’s happening: US stocks rose sharply on Friday as investors assessed the latest speech by Federal Reserve Chairman Jerome Powell.

What happened: Powell signalled a near-term interest rate cut during his speech at the Jackson Hole Symposium.

The Dow Jones index jumped to a record closing high on Friday, also recording gains for the week.

Why it matters: Powell’s remarks suggested an interest rate cut at the Fed’s upcoming meeting in September. However, the Fed chief mentioned that the decision would depend on the next inflation and jobs reports.

Risk sentiment was supported by rising speculations of an interest rate cut after Powell’s comments.

US stocks have recovered sharply from their April lows when markets declined sharply following President Donald Trump’s “Liberation Day” tariff announcement. Optimism around trade deals and strength in earnings reports from big companies have provided support to the US stock indices.

Tech stocks rose sharply on Friday, with Tesla’s stock surging 6.2%, shares of Meta and Amazon each rising more than 2% and Nvidia gaining 1.7%. Intel’s shares climbed around 5.5% following reports that the Trump administration is looking to take a 10% stake in the company.

Ten of the eleven sectors closed higher, with consumer discretionary recording the biggest gains. The Philadelphia SE Semiconductor Index gained 2.7%, while most mega-cap growth shares rose during the session.

The Dow Jones jumped 846.24 points, or 1.89%, to close at 45,631.74 on Friday, topping its previous record close hit on December 4, 2024.

The S&P 500 ended a five-session losing streak that saw a selloff in tech stocks. The S&P 500 surged 1.52% to 6,466.91 on Friday, while the Nasdaq 100 gained 1.54% to 23,498.12.

Both the Dow Jones and S&P 500 stock indices recorded gains for the week, while the tech-laden Nasdaq 100 posted a weekly loss.

What to watch: Investors will continue monitoring tariff-related announcements from the Trump administration.

Data on US Chicago Fed National Activity Index (1630 UAE Time), new home sales (1800 UAE Time) and Dallas Fed manufacturing index (1830 UAE Time) will be released today. Sales of new single-family homes in the US, which rose 0.6% in June to an annualised rate of 627,000 units, are expected to decline by 1.1% in July. The Dallas Fed’s general business activity index for Texas manufacturing, which climbed to 0.9 in July from -12.7 in the previous month, is expected to edge lower to 0.2 in August. Analysts expect the Chicago Fed National Activity Index to decline to 0.2 in July from a reading of -0.10 in June.

The markets today

The euro in focus today ahead of some major economic reports.

Context: The EUR/USD forex pair surged on Friday following Federal Reserve Chairman Jerome Powell’s Jackson Hole speech.

Details: The US dollar fell sharply on Friday after Powell hinted at a possible interest rate cut in September, during his speech at Jackson Hole.

Weakness in the US dollar provided a boost to the EUR/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, dipped 0.9% to 97.73 on Friday.

Meanwhile, data released on Friday showed negotiated wages in the Eurozone surged by 3.95% year-over-year in the second quarter, following 2.46% growth in the previous quarter.

Germany’s economy shrank by 0.3% in the second quarter, worse than the preliminary reading of a 0.1% decline. The contraction followed 0.3% growth in the previous quarter.

The EUR/USD rose around 1% to 1.1720 on Friday, while EUR/GBP forex pair added more than 0.1% to reach 0.8665. The STOXX Europe 600 Index gained 0.4% to close at 561.30.

What to watch: Investors await the release of data on Germany’s Ifo business climate (1200 UAE Time), Ifo current conditions (1200 UAE Time) and Ifo expectations (1200 UAE Time) today. The Ifo Business Climate Index for Germany, which rose to 88.6 in July from 88.4 in June, is expected to decline slightly to 88.3 in August. Analysts expect the Ifo current conditions index to fall to 85 in August from 86.5 in July, while the Ifo expectations index is expected to decline to 89 in August from 90.7 in the previous month.

Markets will also continue monitoring the ongoing talks between the US and Russia related to Ukraine.

Other Markets: Asia-Pacific indices traded higher on Monday, with Japan’s Nikkei 225 and Australia’s S&P/ASX 200 up by 1.08% and 0.94%, respectively, this morning.

The news shaping the markets

Russia accused Ukraine of attacking a nuclear plant, which caused a fire to an auxiliary transformer. The news sent the RUB/USD pair lower in forex trading this morning.

New Zealand’s retail sales grew 0.5% in the second quarter. This representing a slowdown from the previous quarter’s 0.8% growth exerted pressure on the NZD/USD forex pair.

Peru’s economy grew by 2.8% year-over-year in the second quarter. This being the sixth straight year of expansion sent the PEN/USD pair higher in forex trading this morning.

Mexico’s economic activity index surged by 1.3% year-over-year in June, compared to a revised flat reading in the previous month. However, the latest reading coming in short of the projected 1.5% growth exerted pressure on the MXN/USD forex pair.

Argentina’s consumer confidence index fell to 39.94 in August, from 46.37 in the previous month. However, the ARS/USD pair rose in forex trading this morning.

What else to watch today

3-month Bubill auction (1330 UAE Time) and 9-month Bubill auction (1330 UAE Time), Eurozone’s 2027 Bond auction (1345 UAE Time), 2035 Bond auction (1345 UAE Time) and 2038 Bond auction (1345 UAE Time), Brazil’s FGV consumer confidence (1500 UAE Time), France’s 12-month BTF auction (1700 UAE Time), 3-month BTF auction (1700 UAE Time) and 6-month BTF auction (1700 UAE Time), Mexico’s current account (1900 UAE Time), as well as US 3-month Bill auction (1930 UAE Time) and 6-month Bill auction (1930 UAE Time).