Major U.S. stock indexes surged following Powell’s remarks, with the S&P 500 climbing over 1.5% and set to break a five-day losing streak—the longest since January. The Dow Jones industrial average and the Nasdaq Composite each rose by nearly 2%, buoyed by renewed hopes of a rate cut at the Fed’s next meeting in September.

Ten out of 11 S&P 500 sectors traded higher, led by health care and real estate, as traders interpreted Powell’s comments about weakening labor markets and persistent inflationary risks as supportive of easier monetary policy.

Bonds and currencies shift, Europe and Asia rise

In the bond market, Treasury yields fell and the U.S. dollar weakened as traders increased their bets on a September rate cut. The CME FedWatch tool showed a roughly 70% probability of a 0.25 percentage point reduction next month, slightly below earlier expectations. European and Asian equity markets likewise gained, with China’s CSI 300 index reaching multiyear highs, reflecting global optimism for lower U.S. rates.

Powell’s speech carefully balanced concerns: He acknowledged unusual weakness in both hiring and inflationary trends, and signaled confidence that the impacts from tariffs might be temporary. Investors and analysts viewed this as an indirect endorsement of policy easing, though Powell stopped short of explicitly pledging a cut.

Traders are now positioning for the Fed’s September meeting, with markets pricing in up to two rate cuts by year’s end. Analysts caution that sustained market gains are contingent on Powell’s continued focus on downside risks and the ongoing tug-of-war between inflation data and jobs figures.

Overall, Powell’s Jackson Hole speech quickly reversed the recent stock market slide and triggered renewed optimism that the Fed may act to support growth—while underscoring the uncertainty clouding monetary policy for the remainder of 2025.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.