Stocks climb after Powell hints at potential rate cut at Jackson Hole

Stocks rose on Friday after Federal Reserve Chair Jerome Powell signaled a rate cut could be coming, during a speech at policy symposium in Jackson Hole, Wyoming.

The Dow Jones Industrial Average climbed 936 points, or 2.1%, as of 11:56 a.m. EST on Friday, while the S&P 500 gained 102 points, or 1.6%. The tech-heavy Nasdaq Composite was up 1.9%.

In a sigh-inducing sign of relief for investors, Fed Chair Powell said in his speech Friday that current risk conditions "may warrant adjusting our policy stance." The central bank would continue to "proceed carefully" he said.

"Our policy rate is now 100 basis points closer to neutral than it was a year ago, and the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance," Powell said.

Despite mounting pressure from President Trump, the Fed has held off on cutting rates this year as it monitors the impact of Trump administration's tariffs on inflation and the labor market. Powell's speech on Friday, however, may be the strongest indication yet that policy changes could be afoot.

"With Powell acknowledging that it may be time for the Fed to alter its restrictive policy, this could set up stocks for a short-term relief rally," said Bret Kenwell, eToro investment analyst, in an email note on Friday.

"When Fed chairs open the door for a rate cut, it's quite difficult to close," Ryan Sweet, chief U.S. economist at Oxford Economics. "The August employment report or consumer price index are unlikely enough to change Powell's opinion."

The central bank is tasked with so-called dual mandate of maximum employment and minimal inflation — a tricky balance to strike as lowering interest rates can boost job growth while causing inflation to tick higher, and vice versa.

On Friday, Powell noted that job force growth has "slowed considerably" and that the "downside risks to employment are rising." Job growth came in weaker than expected in July, with employers adding 73,000 jobs. The Labor Department also revised job growth sharply down for May and June.

"Overall, while the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers," he said.

Inflation has remained in check this year, although it's still above the Fed's 2% target. Powell noted Friday that tariffs have begun to push up prices in certain categories.

The Federal Open Market Committee (FOMC), the central bank's 12-person interest rate-setting panel, is scheduled to meet next on Sept. 17. Interest rate traders now put the likelihood of a cut at 89%, according to the CME Group's FedWatch Tool.

In stock markets abroad, Germany's DAX returned 0.4% after government data showed that its economy shrank by 0.3% in the second quarter compared with the previous three-month period.

Indexes rose across much of Asia, with stocks climbing 1.4% in Shanghai and 0.9% in South Korea.

The Associated Press contributed to this report.

• Wall Street
• Jerome Powell
• Wyoming