US stocks experienced a notable rally as Federal Reserve Chair Jerome Powell addressed the nation, emphasizing a cautious approach to interest rate cuts. Despite Powell's remarks indicating no immediate rush to lower rates, the market responded positively, with major indices closing at record highs.
The stock market closed the month of September and the third quarter on a high note, with the S&P 500 rising 0.4% to set a new record. The Nasdaq Composite also gained close to 0.4%, while the Dow Jones Industrial Average finished just above the flatline, marking its latest all-time high.
This performance is particularly impressive given that September is typically a challenging month for stocks. The S&P 500 notched its best year-to-date performance since 1997, and the Dow led the major indexes with an 8.2% gain over the last three months.
In his speech, Powell reiterated the Federal Reserve's commitment to maintaining economic stability, stating, "Overall, the economy is in solid shape; we intend to use our tools to keep it there." He emphasized that the Fed is not on a predetermined path for rate cuts and will act based on economic data.
Powell's comments led to a decrease in market expectations for a significant rate cut, with bets for a 50 basis point cut dropping to 35% from 53% the previous day.
Investors are now looking ahead to the September jobs report, which is expected to show the addition of 130,000 nonfarm payroll jobs, with the unemployment rate holding steady at 4.2%. This report is seen as a critical test for the recent market rally, as it will provide insights into the labor market's health and the overall economy.
The stock market's positive response to Powell's speech reflects investor confidence in the economy's resilience. As the market prepares for the upcoming jobs report, analysts remain optimistic about the potential for continued growth, provided that economic indicators align favorably. The next few days will be pivotal in determining the market's trajectory as it navigates through economic uncertainties and potential policy changes.
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