Weekly Market Recap: Markets Rebound as Powell Signals Rate Cuts on the Horizon

Market Overview

U.S. equities shook off early-week weakness to end higher, fueled by Federal Reserve Chair Jerome Powell’s Jackson Hole remarks that reignited September rate cut bets. The Dow Jones Industrial Average led with a 1.6% weekly gain, while small caps surged—Russell 2000 jumped 3.3%. The S&P 500 added 0.3%, and the Nasdaq slipped 0.6% as tech stocks remained under pressure from AI competition headlines and rising input costs.

Sector performance reflected this divide. Energy (+3.1%), Real Estate (+2.5%), and Financials (+2.2%) outperformed, while Technology (-1.6%) and Communication Services (-0.9%) lagged. Year-to-date, Communication Services (+17.1%), Industrials (+17.0%), and Utilities (+15.3%) lead the pack.

Overseas, European equities climbed as investors weighed progress on Russia-Ukraine peace talks and U.K. fiscal policy updates. In Asia, China’s CSI 300 reached a 10-year high on optimism around trade and stimulus, while Japan struggled on weak export data and record bond yields.

Federal Reserve Insights and Economic Roundup

Powell’s Jackson Hole comments confirmed that policy is restrictive and the balance of risks has shifted toward easing. Fed funds futures now price nearly a 90% chance of a September cut, reversing earlier doubts when odds had slipped toward 70%.

Treasury yields whipsawed through the week—before Powell’s remarks, the 10-year note touched 4.33% but settled at 4.26% by Friday, down seven basis points. The two-year yield followed suit, closing at 3.68% from 3.75% the week prior. Credit spreads tightened as U.S. corporate bonds gained 0.36%, municipals added 0.02%, and high yield advanced 0.27%.

Commodities joined the rally: WTI crude rose over 2% on geopolitical risks and a sharp draw in U.S. inventories, while gold inched higher as lower yields and a softer dollar boosted demand.

On the economic front, softer labor market trends have pushed the Fed closer to easing. Unemployment has risen to 4.2% from 3.4% a year ago—a shift rarely seen outside of recessions. While tariff-related price effects remain a risk, the Fed’s longer-term framework revisions signal a higher neutral rate than the 2010s, but near-term cuts look imminent.

The Week Ahead

Investors will parse a heavy slate of economic data:

• Monday: Chicago Fed National Activity Index, New Home Sales, Dallas Fed Manufacturing Activity
• Tuesday: Durable Goods Orders, FHFA House Price Index, S&P Case-Shiller Home Prices, Conference Board Consumer Confidence
• Thursday: Second estimate of Q2 GDP, Core PCE Price Index, Initial Jobless Claims, Pending Home Sales
• Friday: July Personal Income & Spending, Core PCE (the Fed’s preferred inflation gauge), Chicago PMI, University of Michigan Sentiment

Expect markets to remain data-driven, with Fed expectations guiding both equities and fixed income into September’s policy meeting.