Trump says Iran war "close to over" amid hopes for more negotiations
Before Powell spoke in Jackson Hole, the market rallied. Led by the Dow, up 0.8%, with the Russell 2000 +0.6%, the S&P 500 +0.5, and NASDAQ +0.4%. Treasury yields fell on the long end, with the 5-year and 10-year down 2bps, the 30-year down 3bps, while the shorter term was essentially flat. The VIX was steadily falling.
Once his comments were released, the market jumped straight up, with all the indexes up over 1%, the Russell 200 +2.4%. The VIX fell from 16.5 to 15.4. The 10-year bond yield dropped 5bps to 4.26%, the 2-year fell 8bps to 3.70%.
All sectors of the market participated in the relief rally. Corporate bonds and high yield moved up. Precious metals are higher. Crypto is higher. Crude oil is slightly higher (natural gas is flat). The US dollar staged a big pullback on the lower rates, down 0.7 to 98.7.
Powell signaled that the current policy is more restrictive than necessary, and importantly, that the inflation pressures of the tariffs are likely short-lived. It seems the rationale is that the weakness in the labor market will help restrain inflation pressures.
The September rate cut is assured. History says that once the Fed changes course that they make a series of moves, not just a single one.
The dip buyers have been rewarded once again. After the first half hour following Powell's comments, the market paused in the rally and then moved to new highs. The S&P is sitting less than 10 points from the all-time high, and the Dow has hit a record high.
The trend remains positive. The next important date to keep momentum going is NVIDIA (NASDAQ:NVDA)'s earnings next Wednesday, which will bolster the AI narrative.
