Wall Street soars on hopes for lower interest rates as the Dow surges
846 points to a record
[August 23, 2025] By
STAN CHOE
NEW YORK (AP) — Wall Street rallied to its best day in months on Friday
after the head of the Federal Reserve hinted that cuts to interest rates
may be on the way, along with the kick they can give the economy and
investment prices.
The S&P 500 leaped 1.5% for its first gain in six days and finished just
shy of its all-time high set last week.
The Dow Jones Industrial Average soared 846 points, or 1.9%, to its own
record after topping its prior high from December. The Nasdaq composite
jumped 1.9%.
“Ka-Powell” is how Brian Jacobsen, chief economist at Annex Wealth
Management, described the reaction to Jerome Powell’s highly anticipated
speech in Jackson Hole, Wyoming. “The Fed isn’t going to be the
party-pooper.”
The hope among investors had been that Powell would hint that the Fed’s
first cut to interest rates of the year may be imminent. Wall Street
loves lower rates because they can goose the economy, even if they risk
worsening inflation at the same time.
President Donald Trump has angrily been calling for lower rates, often
insulting Powell while doing so. And a surprisingly weak report on job
growth this month pushed many on Wall Street to assume cuts may come as
soon as the Fed’s next meeting in September.
Powell encouraged them on Friday after saying he’s seen risks rise for
the job market. The Fed’s two jobs are to keep the job market healthy
and to keep a lid on inflation, and it often has to prioritize one over
the other because it has just one tool to fix either.
But Powell also would not commit to any kind of timing. He said the job
market looks OK at the moment, even if “it is a curious kind of balance”
where fewer new workers are chasing after fewer new jobs. Inflation,
meanwhile, still has the potential to push higher because of Trump’s
tariffs.
In sum, Powell said that “the stability of the unemployment rate and
other labor market measures allows us to proceed carefully as we
consider changes to our policy stance.”
Treasury yields tumbled in the bond market as bets built that the Fed
would cut its main interest rate in September. Traders see an 83% chance
of that, up from 75% a day earlier, according to data from CME Group.
The yield on the 10-year Treasury fell to 4.25% from 4.33% late
Thursday. The two-year Treasury yield, which more closely tracks
expectations for Fed action, sank to 3.69% from 3.79% in a notable move
for the bond market.
On Wall Street, stocks of smaller companies led the way. They can
benefit more from lower interest rates because of their need to borrow
money to grow. The smaller stocks in the Russell 2000 index surged 3.9%
for its best day since April and more than doubled the S&P 500's rally.
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Traders Bryan Masseria, center, and Columb Lytle, right, works on
the floor of the New York Stock Exchange, Monday, Aug. 18, 2025. (AP
Photo/Richard Drew)
 Homebuilders jumped on hopes that
easier interest rates could encourage more people to buy homes.
Lennar, PulteGroup and D.R. Horton all rose more than 5%.
Travel companies, meanwhile, climbed amid hopes that easier interest
rates could help U.S. households spend more. Norwegian Cruise Line
rallied 7.2%, Delta Air Lines flew 6.7% higher and Caesars
Entertainment rose 7%.
Shares of Nio, a Chinese electric-vehicle maker, that trade in the
United States leaped 14.4% after it began pre-sales of its flagship
premium SUV model, the ES8.
Intel climbed 5.5% after Trump said the chip company has agreed to
give the U.S. government a 10% stake in its business.
Nvidia rose 1.7% to trim its loss for the week. The company, whose
chips are powering much of the world’s move in to
artificial-intelligence technology, had seen its stock struggle
recently amid criticism that it and other AI superstars shot too
high, too fast and became too expensive.
Nvidia CEO Jensen Huang said Friday that the company is discussing a
potential new computer chip designed for China with the Trump
administration. The chips are graphics processing units, or GPUs, a
type of device used to build and update a range of AI systems. But
they are less powerful than Nvidia’s top semiconductors today, which
cannot be sold to China due to U.S. national security restrictions.
All told, the S&P 500 jumped 96.74 points to 6,466.91. The Dow Jones
Industrial Average leaped 846.24 to 45,631.74, and the Nasdaq
composite rallied 396.22 to 21,496.53.
In stock markets abroad, Germany’s DAX returned 0.3% 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.
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AP Writers Teresa Cerojano and Matt Ott contributed.
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