U.S. Stocks Holding On To Notable Gains Following Early Rally

(RTTNews) - Stocks moved sharply higher early in the session and continued to turn in a strong performance in afternoon trading on Friday. The major averages have pulled back off their highs of the session but remain firmly in positive territory.

The major averages have moved roughly sideways in recent trading, holding on to notable gains. The Dow is up 297.52 points or 0.7 percent at 41,010.30, the Nasdaq is up 153.39 points or 0.9 percent at 17,772.74 and the S&P 500 is up 36.73 points or 0.7 percent at 5,607.37.

The strength on Wall Street comes as highly anticipated remarks by Federal Reserve Chair Jerome Powell have seemingly confirmed expectations that the central bank is prepared to begin lowering interest rates.

"The time has come for policy to adjust," Powell said at the Jackson Hole Economic Symposium, although he noted the "timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

Powell's determination that it is time for the Fed to begin cutting rates comes as his "confidence has grown that inflation is on a sustainable path back to 2 percent."

Fed officials have repeatedly said they need "greater confidence" inflation is moving sustainably toward the central bank's 2 percent target before they would consider cutting rates.

Powell said inflation is now much closer to the Fed's objective, with consumer prices rising 2.5 percent year-over-year in July, and noted progress toward 2 percent has resumed after a pause earlier this year.

The remarks by Powell come as recent inflation data has increased confidence the Fed will cut interest rates at its next monetary policy meeting in September.

"Chair Powell just rang the bell to start rate cuts," said MBA SVP and Chief Economist Mike Fratantoni. "He was careful to note that incoming data will inform the pace of cuts, but a cut is coming in September, and this cut will be the first in a series that should bring the federal funds target down significantly over the next 18 months."

According to CME Group's FedWatch Tool, there is a 65.5 percent chance of a quarter point rate cut at the September 17-18 meeting and a 34.5 percent chance of a half point rate cut.

The minutes of the Fed's late July meeting, released on Wednesday, revealed that the "vast majority" of participants believed it would "likely be appropriate" to lower rates at the next meeting if inflation data continued to come in "about as expected."

In U.S. economic news, a report released by the Commerce Department showed a substantial increase by new home sales in the U.S. in the month of July.

The Commerce Department said new home sales spiked by 10.6 percent to an annual rate of 739,000 in July after rising by 0.3 percent to an upwardly revised rate of 668,000 in June.

Economists had expected new home sales to jump by 2.1 percent to an annual rate of 630,000 from the 617,000 originally reported for the previous month.

With the much bigger than expected surge, new home sales reached their highest annual rate since hitting 741,000 in May 2023.

Sector News

Airline stocks have shown a substantial move to the upside on the day, with the NYSE Arca Airline Index soaring by 3.4 percent.

Significant strength has also emerged among oil service stocks, as reflected by the 3.3 percent spike by the Philadelphia Oil Service Index. The rally by oil service stocks comes as the price of crude oil has moved sharply higher.

Housing stocks also continue to turn in a strong performance on the day, resulting in 3.2 percent surge by the Philadelphia Housing Sector Index.

The strength among housing stocks reflects optimism about lower interest rates and a positive reaction to the spike by new home sales.

Telecom, networking and banking stocks are also seeing significant strength, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng Index dipped by 0.2 percent.

Meanwhile, the major European markets all moved higher on the day. WhiletThe U.K.'s FTSE 100 Index climbed by 0.5 percent, while the French CAC 40 Index and the German DAX Index advanced by 0.7 percent and 0.8 percent, respectively.

In the bond market, treasuries have moved back to the upside in response to Powell's speech. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 4.4 basis points at 3.818 percent.