Dow Jones Industrial Average +1.53% last week to a record 45,631.74 US yields trade lower: 10-year -5.7 bps last week to 4.264%Gold +1.10% higher last week to $3,371.67 an ounceEUR +0.08% last week to $1.1722Key data to move markets today
EU: German IFO Business Climate, Current Assessment and Expectations surveys.
US: A speech by New York Fed President John Williams.
US Stock Indices
Dow Jones Industrial Average +1.89%.
Nasdaq 100 +1.54%.
S&P 500 +1.52%, with 10 of the 11 sectors of the S&P 500 up.
A powerful rally swept through Wall Street on Friday after comments from Fed Chair Jerome Powell renewed hopes for an interest rate cut next month. The broad-based gains pushed the Dow Jones Industrial Average up +1.89% to 45,631.74, securing its first record close of the year, while the S&P 500 snapped its longest losing streak since January.
The market's bullish sentiment was best captured by the performance of small-cap stocks. The Russell 2000 index surged +3.86%, more than doubling the gains of the S&P 500. This outsized move, the largest of its kind since last November, indicates strong investor optimism about the positive impact of lower rates on smaller companies. Following the advance, the Russell 2000 is now within striking distance of its November 2021 peak, nearing its first new record in almost four years.
According to LSEG I/B/E/S data, y/o/y earnings growth for the S&P 500 in Q2 is projected to be +12.9%. This number jumps to 14.9% when excluding the Energy sector. Of the 474 companies in the S&P 500 that have reported earnings to date for Q2 2025, 80.0% have reported earnings above analyst estimates, with 78.9% of companies reporting revenues exceeding analyst expectations. The y/o/y revenue growth is projected to be 6.3% in Q2, increasing to 7.5% when excluding the Energy sector.
Information Technology, at 94.8%, is the sector with most companies reporting above estimates, while Communication Services, with a surprise factor of 12.1%, is the sector that’s beaten earnings expectations by the highest surprise factor. Within Materials, 46.2% of companies have reported above estimates, and Real Estate at -0.6% is the sector with the lowest surprise factor. The S&P 500 surprise factor is 8.0%. The forward four-quarter price-to-earnings ratio (P/E) for the S&P 500 sits at 22.5x.
In corporate news, the US President finalized an agreement that provides the federal government with a nearly 10% stake in Intel, an unconventional effort to revitalize the company and boost domestic chip manufacturing.
Apple is in early discussions about integrating Google's Gemini AI to enhance its Siri voice assistant, marking a potential shift toward outsourcing key AI technology.
Meta Platforms has reportedly agreed to a deal valued at a minimum of $10 billion with Google for cloud computing services to support its significant AI expenditures.
A report from The Information indicated that Nvidia has instructed its component suppliers, including Samsung Electronics and Amkor Technology, to cease production related to its H20 AI chip.
Visa has closed its open-banking business in the US. According to sources, the decision was driven by regulatory uncertainty over consumer-data rights and the prospect of higher fees for customer information.
S&P 500 Best performing sector
Consumer Discretionary +3.18%, with Mohawk Industries +7.28 %, Norwegian Cruise Line Holdings +7.23 %, and Caesars Entertainment +7.00 %.
S&P 500 Worst performing sector
Consumer Staples -0.35%, with Kroger -2.60%, Monster Beverage -2.36%, and Philip Morris International -1.57%.
Mega Caps
Alphabet +3.04 %, Amazon +3.10 %, Apple +1.27 %, Meta Platforms +2.12 %, Microsoft +0.59 %, Nvidia +1.72 %, and Tesla +6.22 %.
Information Technology
Best performer: Enphase Energy +10.41 %.
Worst performer: Intuit -5.03%.
Materials and Mining
Best performer: Dow +5.99 %.
Worst performer: Mosaic -0.18%.
European Stock Indicest
CAC 40 +0.40 %.
DAX +0.29 %.
FTSE 100 +0.13 %.
Commodities
Gold spot +1.00% to $3,371.67 an ounce.
Silver spot +1.72% to $38.82 an ounce.
West Texas Intermediate +0.46% to $63.77 a barrel.
Brent crude +0.36% to $67.82 a barrel.
Gold prices rebounded on Friday, influenced by heightened expectations for a September interest rate cut from the Fed. This sentiment was bolstered by comments from Chair Jerome Powell at the central bank's Jackson Hole symposium.
A concurrent -0.92% decline in the US dollar made the metal more attractive to foreign buyers, supporting a +1.00% rise in spot gold to $3,371.67 per ounce. For the week, gold prices recorded a +1.10% increase.
In the physical market, demand in key Asian hubs remained subdued due to price volatility, although jewellers in India resumed purchases ahead of a major festival season.
Oil prices stabilized on Friday, concluding the session with their first weekly gain in three weeks, as the market weighed supply risks from the ongoing Russia-Ukraine conflict against uncertain diplomatic efforts.
At Friday's settlement, Brent crude futures were up +0.36% at $67.82 a barrel, securing a +2.54% weekly gain. US WTI crude futures settled +0.46% higher at $63.77 a barrel, rising +1.00% on the week.
Geopolitical tensions provided underlying support for prices throughout the week. Hostilities continued unabated, highlighted by a Russian air attack near Ukraine's border with the EU and a retaliatory Ukrainian strike on a Russian oil refinery and the critical Unecha pumping station. The damage to this station, part of the Europe-bound Druzhba oil pipeline, threatens to suspend Russian oil supplies to Hungary and Slovakia for at least five days.
Counterbalancing these supply threats were tentative peace overtures, including an effort by the US President to arrange a summit between his Russian and Ukrainian counterparts. However, the viability of such a meeting was cast into doubt after Russian Foreign Minister Sergei Lavrov stated that no agenda for a potential summit currently exists.
On the supply side, US energy firms cut the number of operating oil and natural gas rigs for the fourth time in five weeks. The rig count, an early indicator of future output, fell by one to 538, its lowest point since mid-July, according to energy services firm Baker Hughes.
Note: As of 5 pm EDT 22 August 2025
Currencies
EUR +0.94% to $1.1722.
GBP +0.84% to $1.3522.
Bitcoin +4.04% to $117,039.96.
Ethereum +14.40% to $4,851.70.
The US dollar experienced a broad-based decline on Friday after Fed Chair Jerome Powell signaled the possibility of an interest rate cut at the FOMC September meeting, while refraining from a firm commitment.
The dollar index, which was trading around 98.70 prior to the comments, subsequently fell -0.92% to close the day at 97.73. This marked the dollar's largest single-day loss against the euro and the yen since 1st August.
Against the dollar, the euro strengthened by +0.94% to $1.1722, after reaching a session high of $1.1742—its strongest level since 28th July. The dollar also weakened -0.94% against the Japanese yen, falling to ¥146.93. Sterling capitalized on the dollar's weakness as well, rising +0.84% to $1.3522.
On a weekly basis, however, the performance was more mixed. The dollar concluded the week with a -0.17% loss against the yen, while the euro posted a modest weekly gain of +0.08%. In contrast, sterling's strong daily performance was not enough to offset earlier losses, resulting in a -0.24% decline for the week.
Fixed Income
US 10-year Treasury -6.5 basis points to 4.264%.
German 10-year bund -3.2 basis points to 2.727%.
UK 10-year gilt -3.5 basis points to 4.697%.
US Treasury yields declined sharply on Friday after Fed Chair Jerome Powell acknowledged the dual challenges of persistent inflation and a cooling labor market, which investors interpreted as a signal that the bar for monetary easing may be lowering.
The impact was most pronounced at the short end of the curve. The two-year Treasury yield, which is highly sensitive to Fed policy expectations, fell -9.1 bps to 3.709%, marking its largest single-day drop since 1st August. This contributed to a -5.2 bps decline for the week.
Longer-term yields followed suit, with the 10-year yield falling -6.5 bps to 4.264%—its biggest one-day decline in three weeks. The 30-year yield decreased by -3.2 bps. On a weekly basis, the 10-year and 30-year yields were down -5.7 bps and -3.2 bps, respectively.
Consequently, the yield curve steepened significantly following Powell's remarks. The spread between the two-year and 10-year yields widened to 55.5 bps, its steepest level since mid-July. This movement indicates that traders are increasingly pricing in the likelihood of an imminent interest rate cut.
Fed funds futures traders are now pricing in a 87.3% probability of a rate cut in September, up from 85.4% last week, according to CME Group's FedWatch Tool. Traders are currently anticipating 54.4 bps of cuts by year-end, slightly higher than the 54.2 bps expected last week.
Across the Atlantic, eurozone government bond yields declined on Friday. In the eurozone's market, Germany's 10-year bond yield fell -3.2 bps to 2.727%, concluding the week with a -6.2 bps decline. The policy-sensitive two-year German yield decreased by -2.7 bps to 1.971%, contributing to a weekly decline of -3.7 bps. On the long end of the maturity spectrum, the German 30-year yield declined by -2.0 bps on Friday, registering a weekly decline of -4.1 bps.
Yields in peripheral European markets also fell, with Italy's 10-year yield declining -6.0 bps to 3.529%, representing a -5.1 bps decline for the week. This stronger performance in Italian debt caused the spread between Italian and German 10-year yields to narrow to 80.2 bps. In another sign of market convergence, the yield spread between Italian and French 10-year bonds has shrunk to just 10.8 basis points, as Italian borrowing costs continue to approach those of France.
Note: As of 5 pm EDT 22 August 2025
Global Macro Updates
Fed Chair Jerome Powell’s speech is seen as more dovish than expected. The prepared remarks from Fed Chair Jerome Powell's Jackson Hole speech presented a distinctly dovish tilt, signaling that a policy adjustment may be warranted. Powell highlighted a shifting balance of risks, noting that signs of a weakening labor market and rising downside risks to employment are becoming more apparent. He specifically flagged that tighter immigration has led to an abrupt slowdown in labor force growth.
Furthermore, Powell observed that GDP growth has slowed notably, reflecting a deceleration in consumer spending. While he acknowledged that the effects of tariffs on consumer prices are now ‘clearly visible,’ he suggested the ‘reasonable base case’ is that these effects will be short-lived.
In response to these remarks, traders significantly increased their expectations for monetary easing. Analysts interpreted the address as signaling the Fed's intent to lower rates next month, a notable pivot from the more hawkish tone of the July FOMC meeting and from other Fed officials earlier in the week.
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