U.S. stocks are surging on Aug. 22 after Federal Reserve Chair Jerome Powell indicated that interest rate cuts are on the way during his highly anticipated speech in Jackson Hole, Wyoming.
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The blue-chip Dow Jones Industrial Average, which serves as a proxy for the U.S. economy, rocketed 1,000 points higher to hit an all-time high of 45,743.06. The benchmark S&P 500 index rose 1.59%, while the Nasdaq Composite index gained 2% at midday.
U.S. markets are reacting positively to remarks Powell made at the Fed’s annual summer meeting in Jackson Hole. The central bank governor said that current economic conditions “may warrant” interest rate cuts in coming months and that it might now be time for the Federal Reserve to shift its restrictive monetary policy stance.
Relief Rally
Analysts were quick to label the Aug. 22 rise in U.S. stocks a “relief rally,” coming as it does after the S&P 500 sold off for five consecutive days. Technology stocks sold off the most in recent days as markets worried about elevated valuations, persistent inflation, and the path forward for interest rates.
Markets also slumped as U.S. President Donald Trump intensified his attacks on the Federal Reserve, threatening to fire Chair Powell and calling for other central bank governors to resign. Markets are currently pricing in a 91% chance that the Federal Reserve lowers interest rates by 25 basis points at its upcoming Sept. 17 meeting.
Is the SPDR S&P 500 ETF Trust a Buy?
The SPDR S&P 500 exchange-traded fund (SPY) currently has a consensus Moderate Buy rating among 504 Wall Street analysts. That rating is based on 418 Buy, 80 Hold, and six Sell recommendations issued in the last three months. The average SPY price target of $719.03 implies 11.43% upside from current levels.
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