The U.S. stock market pushed higher last week and closed on a high note sparked by Federal Chair Powell's strongest signal yet that interest rate cuts are coming. Speaking at the Federal Reserve's annual retreat in Jackson Hole, Wyoming on Friday, Chairman Jerome Powell noted that “the time has come for policy to adjust” to avoid any further weakening in labor market conditions, thereby opening the door for rate cuts to begin at the next Fed meeting in September.

Despite the market already anticipating a September rate cut, Powell’s confirmation of near-term policy pivot propelled stocks higher, particularly rate sensitive stocks like real estate and tech stocks, led by Nvidia and Tesla. For the week, the Dow Jones average rose +1.3%, the Nasdaq Composite added +1.4%, and the S&P 500 gained +1.5%. Treasury yields finished lower, with the two-year yield dropping 0.15% to finish at 3.91%, the third-lowest closing level this year, and the 10-year yield closed at 3.80%.

Markets broadly overlooked a substantial revision by the Bureau of Labor Statistics to the number of jobs that were added to the U.S. economy over the last year. The preliminary payrolls revision showed 818,000 jobs wiped out from the originally reported figures in the 12 months through March 2024, marking the biggest downward adjustment since the global financial crisis. The update reduced the average monthly job gain from 246k to 178k over that period. Data revisions are not uncommon, but usually not to that degree, even with the large standard deviation typically assigned to non-farm payroll figures. While it provided further evidence that labor market strength may not be quite as robust as broadly perceived, the negative revision wasn’t significant enough to change the overarching market narrative of the U.S. maintaining the soft landing trajectory with stable but slowing economic growth and easing inflation and monetary policy.

In the week ahead, oil prices will be on watch as Israel and Lebanese paramilitary group Hezbollah engaged in a heavy missile exchange on Sunday, fueling fears of a wider conflict in the Middle East. The exchange of fire does not appear to have set off a long-feared war, but tensions remain high. Also in the spotlight this week will be Nvidia’s earnings report on Wednesday after market close, which has the potential to move markets. The chipmaker’s highly anticipated report could have broad implications for the AI growth story.