Fed Chair Powell Signals Potential Rate Cuts, Sparking Market Shifts
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Fed's Powell Hints At Policy Shifts, Dollar Plunges, Gold Rallies As Investors Flock To Rate-Cut Winners: This Week In The Markets - Ford Motor (NYSE:F), Boeing (NYSE:BA)
Markets rally on Powell's remarks, with small-cap stocks, real estate and regional banks surging; gold hits record highs. In a pivotal address at the Jackson Hole Symposium in Wyoming, Federal Reserve Chair Jerome Powell signaled a forthcoming shift in interest rates Friday, stating "the time has come for policy to adjust." His remarks suggest the Fed is on the cusp of easing interest rates, yet Powell emphasized the importance of data-driven decisions, carefully avoiding any commitment to specific timing or the magnitude of those cuts. As the Fed becomes more confident in inflation gradually returning to its 2% target, Powell emphasized the need to closely monitor the labor market, which he said is showing "unmistakable" signs of cooling. The anticipation of impending interest rate cuts extended a decline in the dollar, which tumbled to its lowest level in over a year. This shift in policy direction invigorated interest rate-sensitive markets, with small-cap stocks, real estate and regional banks surging as clear beneficiaries following Powell's remarks. Simultaneously, gold -- which historically moves inversely to interest rates and the dollar -- soared to a record high, surpassing $2,500 per ounce. All major U.S. equity indices ended the week in positive territory, with the S&P 500, represented by the SPDR S&P 500 ETF Trust SPY, rising 1.3%. Small-cap stocks significantly outperformed their large-cap counterparts, as the iShares Russell 2000 ETF IWM surged 3.4% for the week. Election-Proof Stocks Market strategist Jay Woods said certain stocks, especially in the defense and cybersecurity sectors, could perform well regardless of whether Donald Trump or Kamala Harris wins the presidency. Notable mentions include Boeing Company BA, Lockheed Martin Corp. LMT and Palo Alto Networks Inc. PANW, alongside Woods' recommended exchange traded funds for diversified exposure. Job Growth Revised The U.S. economy added 818,000 fewer jobs than initially reported from April 2023 to March 2024. This significant revision increases expectations for interest rate cuts, as it suggests the labor market is weaker than previously thought. EV Ambitions Scaled Ford Motor Co. F, General Motors Co. GM and Stellantis N.V. STLA are reducing their electric vehicle investments due to weakening demand. Ford canceled a planned electric SUV this week, while GM and Stellantis delayed new EV projects, signaling a strategic shift in uncertain market conditions. Gold Bars Shine With gold prices cracking $2,500 per ounce, a standard 400-troy-ounce gold bar is now valued at $1 million. The surge is driven by expectations of Federal Reserve interest rate cuts and a weakening U.S. dollar, boosting gold's appeal to investors. Photo created using artificial intelligence via MidJourney. Market News and Data brought to you by Benzinga APIs
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Russell 2000 Outshines S&P 500, Nasdaq 100 As Powell Eyes Rate Cuts; Dollar Sinks, Regional Banks Rocket: What's Driving Markets Friday? - BILL Holdings (NYSE:BILL)
His remarks sparks a rally in risk-sensitive assets, with small caps sharply outperforming large-cap counterparts. Federal Reserve Chairman Jerome Powell has dispelled any remaining uncertainty by signaling that the central bank is preparing to shift its monetary policy, effectively paving the way for imminent interest rate cuts. His remarks triggered a rally in rate-sensitive assets and pushed the dollar towards the lowest close since July 2023. "The time has come for policy to adjust. The direction of travel is clear," Powell announced at the Jackson Hole Symposium on Friday in Wyoming. Powell expressed increased confidence in inflation returning to the 2% target and highlighted a heightened focus on the labor market, noting that conditions are cooling. The market found significant support in Powell's indication the Federal Reserve has "ample room" to respond to any emerging risks. Small-cap stocks emerged as clear winners following Powell's speech on Friday, with the Russell 2000 index surging by 3% by midday trading in New York. Traders flocked to these companies, anticipating significant relief from the prospect of lower borrowing costs. Regional banks, as tracked by the SPDR S&P Regional Banking KRE, were the brightest market spot, with the industry gauge rallying over 4.5%. All of its 141 constituents showed a positive performance. In contrast, large-cap indices maintained their gains from the market open, showing only little reaction to Powell's remarks. In the forex market, the dollar extended its decline, falling by 0.7% and heading toward its fifth negative weekly close with the sharpest decline since mid-November 2023. The decline in Treasury yields weighed on the greenback. Commodities rallied, with gold up over 1.1% setting fresh all-time highs, and silver soaring 2.5%. Crude oil also surged, up 2.4%, while copper gained 1.7%. Bitcoin BTC/USD rose 2.25% to $61,863. Friday's Performance In Major U.S. Indices, ETFs According to Benzinga Pro data: The SPDR S&P 500 ETF Trust SPY was 0.5% higher to $559.11. The SPDR Dow Jones Industrial Average DIA rose 0.6% to $409.93. The tech-heavy Invesco QQQ Trust Series QQQ rose 0.5% to $477.32. The iShares Russell 2000 ETF IWM rallied 3% to $220.06. The Real Estate Select Sector SPDR Fund XLRE outperformed, by 1.6%. The Consumer Staples Select Sector SPDR Fund XLP lagged, down by 0.2%. Friday's Stock Movers Restaurant chain Cava Group Inc. CAVA rallied 23%, after upbeat financial results last quarter. Other stocks reacting to earnings were BILL Holdings, Inc. BILL down over 5%; Buckle, Inc. BKE up 6.9%; Ross Stores, Inc. ROST up 1.3%; Ubiquiti Inc. UI up 5.9 and Workday, Inc. WDAY, up over 11%. Roku Inc. ROKU rallied over 12% after Guggenheim upgraded the stock from Neutral to Buy. Mortgage-sensitive Redfin Corp. RDFN rallied over 20%. Within regional banks, Eagle Bancorp, Inc. EGBN, United Community Banks Inc. UCB and Valley National Bancorp VLY were the strongest performers, up 10.5%, 9.6% and 8.5%, respectively. Read More: * Powell Removes 'Any Uncertainty' Around September Rate Cuts In Jackson Hole Speech: Economists Don't miss the opportunity to dominate in a volatile market at the Benzinga SmallCAP Conference on Oct. 9-10 at the Chicago Marriott Downtown Magnificent Mile. Get exclusive access to CEO presentations, 1:1 meetings with investors, and valuable insights from top financial experts. Whether you're a trader, entrepreneur, or investor, this event offers unparalleled opportunities to grow your portfolio and network with industry leaders. Secure your spot and get your tickets today! This image was created using artificial intelligence MidJourney Market News and Data brought to you by Benzinga APIs
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Federal Reserve Chairman Jerome Powell's recent comments hint at possible interest rate cuts, causing significant movements in various financial markets. The U.S. dollar weakens while gold, cryptocurrencies, and small-cap stocks see notable gains.
Powell's Remarks Shake Up Financial Markets
Federal Reserve Chairman Jerome Powell's recent comments have sent ripples through the financial world, hinting at potential shifts in monetary policy. Speaking at the Jackson Hole Economic Symposium, Powell suggested that the Fed might be open to cutting interest rates in the near future, a move that has sparked significant reactions across various asset classes
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.Dollar Weakens as Rate Cut Expectations Rise
The U.S. dollar experienced a notable decline following Powell's remarks. Investors, interpreting the Fed chair's words as a signal of potential rate cuts, began to move away from the dollar. This shift in sentiment led to a weakening of the currency against its major counterparts, reflecting the market's adjustment to the possibility of lower interest rates in the world's largest economy
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.Gold and Cryptocurrencies Rally
As the dollar weakened, alternative assets saw a surge in interest. Gold, often considered a safe-haven asset, rallied on the news. The precious metal's appeal tends to increase when the dollar weakens and interest rates are expected to fall. Similarly, cryptocurrencies experienced a boost, with Bitcoin and other digital assets seeing increased buying pressure as investors sought alternatives to traditional currencies
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.Small-Cap Stocks Outperform
In the equity markets, small-cap stocks, as represented by the Russell 2000 index, outperformed their larger counterparts. The Russell 2000 saw significant gains, outpacing both the S&P 500 and the Nasdaq 100. This outperformance suggests that investors are becoming more optimistic about the prospects of smaller companies, which often benefit more from lower interest rates and a more accommodative monetary policy
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Regional Banks See Positive Movement
The potential for rate cuts also had a positive impact on regional banks. The SPDR S&P Regional Banking ETF (KRE) experienced a notable uptick, indicating that investors view the possibility of lower rates as beneficial for smaller financial institutions. This movement suggests a shift in sentiment towards regional banks, which have faced challenges in recent months
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.Implications for Future Economic Policy
Powell's comments and the subsequent market reactions highlight the delicate balance the Federal Reserve must maintain. While lower interest rates can stimulate economic growth, they also carry risks such as potential inflation. The Fed's future decisions will likely continue to have significant impacts across various sectors of the financial markets, influencing everything from currency values to stock performances and beyond.
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