Stocks rose in premarket trading Friday, knocking off Thursday’s losses and pulling indexes within striking distance of all-time highs, though the market will face a major test later this morning when Federal Reserve Chairman Jerome Powell takes the stage.
Stocks rose ahead of what's sure to be an action-packed Friday.
Dow Jones Industrial Average futures were up 0.4%, or 170 points shortly after 9:30 a.m.’s market open, while the S&P 500 and Nasdaq Composite climbed 0.6% and 0.9%, respectively.
All three indexes opened within striking distance of their intraday all-time highs set last month, with the Dow and S&P starting trading within 1.2% of their intraday records and the Nasdaq 4.8%.
The morning gains reverse losses from Thursday, which was the worst day for all three indexes in more than two weeks, a selloff marked by low trading volume as investors waited on pins and needles for Powell’s speech at 10 a.m. EDT Friday as part of the Fed’s annual symposium in Jackson Hole, Wyoming.
The U.S.’ top central banker is expected to give further insight into the Fed’s interest rate plan of action as equity investors look for clues on major rate cuts to support the stock market’s high valuations.
The impact of Powell’s speech on stocks. If Powell telegraphs a single rate cut at the Fed’s meeting next month, “it shouldn’t upset the market, although it’s not going to be a new catalyst, either, as it’s already priced in,” wrote Sevens Report founder Tom Essaye in a Friday note to clients. Essaye noted if Powell strikes a more aggressive attitude toward cuts than expected, stocks will likely stage a broad “solid rally” led by companies more sensitive to interest rates, such as high-growth technology firms, with bonds likely to gain in lockstep, predicting 10-year U.S. Treasury yields could fall to a new 2024 low (lower yields mean more valuable existing bonds). On the other hand, if Powell is less cut-hungry than expected, Essaye forecasted a “sharp decline” across the market.
The potential for a post-Jackson Hole selloff evokes memories of 2022’s event, when Powell’s hawkish speech caused the S&P to decline over 3%. The market strongly anticipates the Fed to begin lowering rates next month, as easing inflation quiets concerns about the bank’s primary reason for high rates, and a cooler labor market bolsters the case for a growth-friendly move. The Fed’s target interest rate range sits now at 5.25% to 5.5%, the highest level since 2001. Though stocks withered in 2022 as the Fed began hiking rates, they recovered dramatically in 2023 and 2024, defying conventional wisdom that quick rate hikes cause stocks to enter an extended slump.