Wall Street delivered its best day in months on August 22, 2025, as investors cheered Federal Reserve Chair Jerome Powell’s strongest signal yet that interest rate cuts could be imminent. The Dow Jones Industrial Average soared 846 points, or 1.9%, to a record closing high of 45,631.74, surpassing its previous peak from December, according to the Associated Press. The S&P 500 leaped 1.5% to 6,466.91, snapping a five-day losing streak and finishing just shy of its all-time high. The Nasdaq Composite rose 1.9% to close at 21,496.53, with all three major U.S. indexes rallying as Powell’s remarks from the annual Jackson Hole Economic Policy Symposium reverberated through the markets.
“Ka-Powell,” quipped Brian Jacobsen, chief economist at Annex Wealth Management, describing the market’s euphoric reaction to Powell’s highly anticipated speech. The catalyst? Powell’s acknowledgment that “the shifting balance of risks may warrant adjusting our policy stance,” a phrase that Wall Street interpreted as a green light for rate cuts, possibly as soon as the next Federal Open Market Committee (FOMC) meeting scheduled for September 16-17.
The surge came after a week of anxious trading, as investors awaited clarity on the Fed’s direction amid mixed economic signals. The latest employment report showed job growth slowing sharply, with employers adding just 73,000 jobs in July—well below expectations. Powell addressed this, noting a “curious kind of balance” in the labor market, where both the supply of and demand for workers have cooled. He warned, “downside risks to employment are rising,” signaling the Fed’s increased concern about the labor market even as inflation remains stubbornly above its 2% target, partly due to the Trump administration’s tariffs.
According to The Wall Street Journal, Powell’s remarks marked the strongest indication yet that the Fed is considering a policy shift. “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, an investment analyst at eToro. Ryan Sweet, chief U.S. economist at Oxford Economics, added, “When Fed chairs open the door for a rate cut, it’s quite difficult to close.”
Traders wasted no time recalibrating their expectations. The CME Group’s FedWatch Tool showed the probability of a September rate cut jumping to 83%, up from 75% just a day earlier. Treasury yields tumbled as well, with the 10-year note dropping to 4.25% from 4.33% and the two-year yield falling to 3.69% from 3.79%. Lower yields reflect expectations of easier monetary policy and often lead to lower borrowing costs across the economy.
The rally was broad, but certain sectors stood out. Small-cap stocks in the Russell 2000 index surged nearly 4% for their best day since April, as these companies are particularly sensitive to changes in borrowing costs. “Sectors that should benefit the most include home construction, small caps and banks,” said Larry Tentarelli, Chief Technical Strategist for Blue Chip Daily Trend Report, to Investopedia.
Homebuilders were among the biggest winners, with Lennar, PulteGroup, D.R. Horton, and Toll Brothers all rising more than 5%. Builders FirstSource, a major supplier of residential construction materials, jumped 8%, while flooring supplier Mohawk Industries gained 7%. Elevated interest rates have kept the U.S. housing market in a deep freeze for much of the last three years, but hopes for lower rates sparked optimism about a home-buying rebound.
Travel and leisure stocks also climbed, buoyed by the prospect of increased consumer spending. Norwegian Cruise Line rallied 7.2%, Delta Air Lines rose 6.7%, and Caesars Entertainment added 7%. Shares of Carnival and other cruise operators advanced as well, reflecting renewed risk appetite among investors.
The technology sector, which had been under pressure earlier in the week, rebounded sharply. Tesla shares jumped more than 6%, while Alphabet and Amazon each gained over 3%. Meta Platforms rose about 2%, and chip giants Nvidia and Broadcom both tacked on more than 1%. Intel’s stock climbed 5.5% after President Donald Trump announced that the U.S. government would acquire a 10% stake in the company. According to Bloomberg, this move marks a significant departure from the government’s usual practice of only stepping in during times of extreme stress. Trump said, “They’ve agreed to do it, and I think it’s a great deal for them.”
Other chipmakers benefited from the news as well, with ON Semiconductor and GlobalFoundries each rising about 6%, and Microchip Technology gaining 5%. The PHLX Semiconductor Index rose nearly 3% on Friday.
Chinese electric-vehicle maker Nio saw its U.S.-listed shares jump 14.4% after it began pre-sales of its flagship ES8 SUV, which the company says is the largest electric SUV made in China. Nio touted the model as setting “a new benchmark in the premium BEV segment and leads the way for large three-row SUVs to the all-electric era.” The official launch is set for late September.
Meanwhile, the cryptocurrency sector rallied alongside the return of risk tolerance. Shares of major bitcoin buyer MicroStrategy and cryptocurrency exchange Coinbase each climbed more than 6%. Bitcoin itself rebounded to around $117,000, up from an earlier low of $111,700, though still shy of its record high from just over a week ago.
Not all the news was positive, however. Shares of Intuit, the maker of TurboTax and MailChimp, tumbled 5% after the company issued a disappointing outlook for the current quarter and full year, despite strong quarterly results. Workday, a human resources software provider, also fell nearly 3% after its earnings report failed to meet expectations for future growth.
Globally, the mood was more subdued. Germany’s DAX rose 0.3% after data showed the country’s economy shrank by 0.3% in the second quarter compared to the previous quarter. Asian markets rallied, with Shanghai stocks climbing 1.4% and South Korea’s Kospi up 0.9%.
Commodity markets reflected the renewed optimism. Gold futures rose 1.1% to $3,415 an ounce, while West Texas Intermediate crude oil futures increased 0.4% to $63.80 per barrel. The U.S. dollar index fell 0.9%, trading near its lowest level in a month, as expectations for lower rates weighed on the currency.
Looking ahead, all eyes are on the Fed’s September meeting, where the central bank will weigh the latest data on jobs and inflation. While the path forward remains uncertain, Powell’s comments have clearly shifted the narrative. As Chris Zaccarelli, chief investment officer at Northlight Asset Management, put it, “The bar is extremely high now for the Fed to leave rates unchanged in less than a month.”
For investors, Friday’s rally was a reminder of how quickly sentiment can change—and how closely the market’s fortunes are tied to the words of the Fed chair. With the prospect of lower interest rates on the horizon, the stage is set for more volatility—and, perhaps, more records to fall.
