Stock market today: Wall Street rallies near its record heights as 'time has come' for cuts to rates

NEW YORK (AP) — U.S. stocks rallied close to their records Friday after the head of the Federal Reserve finally said out loud what Wall Street has been expecting for a while: Cuts to interest rates are coming soon to help the economy.

The S&P 500 rose 1.1% after Fed Chair Jerome Powell said in a highly anticipated speech that the time has come to lower its main interest rate from a two-decade high. The index pulled within 0.6% of its all-time high set last month and has clawed back virtually all of its losses from a brief but scary summertime swoon.

The Dow Jones Industrial Average rose 462 points, or 1.1%, to close above the 41,000 level for the first time since it set its own record in July, while the Nasdaq composite jumped 1.5%.

Powell’s speech marked a sharp turnaround for the Fed after it began hiking rates two years ago as inflation spiraled to its worst levels in generations. The Fed’s goal was to make it so expensive for U.S. households and companies to borrow that it slowed the economy and stifled inflation.

While careful to say the task is not complete, Powell used the past tense to describe many of the conditions that sent inflation soaring after the pandemic, including a job market that “is no longer overheated.” That means the Fed can pay more attention to the other of its twin jobs: to protect an economy that's slowing but has so far defied many predictions for a recession.

“The time has come for policy to adjust,” Powell said. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

That second part of his statement held back some of the details that Wall Street wanted so much to hear.

Treasury yields had already pulled back sharply in the bond market since April on expectations the Federal Reserve’s next move would be to lower its main interest rate. The only questions were by how much the Fed would cut and how quickly it would move.

A danger is that traders have built their expectations too high, something they’ve frequently done in the past. Traders see a high likelihood the Fed will cut its main interest rate by at least 1 percentage point by the end of the year, according to data from CME Group. That would require the Fed to go beyond the traditional move of a quarter of a percentage point at least once in its three remaining meetings scheduled for 2024.

If their predictions are wrong, which has also been a regular occurrence, that could mean Treasury yields have already pulled back too much since their decline began in the spring. That in turn could pressure all kinds of investments. On Thursday, for example, the S&P 500 fell to its worst loss in more than two weeks after Treasury yields climbed.

“Like usual, we will be sitting on the edge of our seats not only trying to figure out what the next data point will be, but how the Fed will interpret the data,” said Brian Jacobsen, chief economist at Annex Wealth Management.

For Friday, at least, Powell’s speech heled lead to a widespread rally across Wall Street.

The smaller stocks in the Russell 2000 jumped 3.2% to lead the market. Smaller companies can feel greater benefit from lower interest rates because of their need to borrow to grow.

In the S&P 500 index of big companies, more than 85% of the stocks climbed. The strongest push upward came from Nvidia, which rose 4.5%.

Its stock has been shaky this summer amid worries that investors took it and other highly influential Big Tech stocks too high in their mania around artificial-intelligence technology. But Nvidia has been charging back recently ahead of its highly anticipated profit report scheduled for next week.

Most of the other companies in the S&P 500 have been reporting better-than-expected profit so far this reporting season, as is usually the case.

Ross Stores added 1.8% after topping analysts’ estimates for profit and revenue during the latest quarter. But CEO Barbara Rentler also said the retailer’s low- and moderate-income customers continue to feel the pressure of high prices across the economy, even if inflation has slowed. It's a concern that many CEOs have been echoing recently.

That helped offset an 8.2% tumble for Red Robin Gourmet Burgers, which reported a worse loss for the latest quarter than expected. It cited a slowdown across the restaurant industry.

All told, the S&P 500 rose 63.97 points to 5,634.61. The Dow jumped 462.30 to 41,175.08, and the Nasdaq composite gained 258.44 to 17,877.79.

In the bond market, the yield on the 10-year Treasury fell to 3.79% from 3.86% late Thursday. The two-year Treasury yield, which moves more closely with expectations for action by the Fed, dropped to 3.91% from 4.01% late Thursday.

In stock markets abroad, indexes rose modestly in Europe after finishing mixed across Asia.

The Nikkei 225 added 0.4% in Tokyo after Bank of Japan Gov. Kazuo Ueda appeared to indicate more increases to interest rates may be coming, but they would be gradual.

The Bank of Japan helped set off a scary summertime swoon in financial markets after a rate hike forced many hedge funds and other investors to abandon a popular trade all at once. An ensuing assurance from a top bank official that it wouldn’t raise rates again as long as markets were unstable helped calm conditions.

AP Business Writers Yuri Kageyama and Matt Ott contributed.

FILE - The New York Stock Exchange is shown on Aug. 21, 2024, in New York. (AP Photo/Peter Morgan, File)

FILE - People walk in front of Tokyo Stock Exchange building in Tokyo, on May 28, 2024. (AP Photo/Eugene Hoshiko, File)

FILE - A person looks at an electronic stock board showing Japan's Nikkei index at a securities firm in Tokyo, on July 12, 2024. (AP Photo/Eugene Hoshiko, File)

BOSTON (AP) — A study that explores the feasibility of using pigeons to guide missiles and one that looks at the swimming abilities of dead fish were among the winners Thursday of this year’s Ig Nobels, the prize for comical scientific achievement.

Held less than a month before the actual Nobel Prizes are announced, the 34th annual Ig Nobel prize ceremony at the Massachusetts Institute of Technology was organized by the Annals of Improbable Research magazine’s website to make people laugh and think. Winners received a transparent box containing historic items related to Murphy’s Law — the theme of the night — and a nearly worthless Zimbabwean $10 trillion bill. Actual Nobel laureates handed the winners their prizes.

“While some politicians were trying to make sensible things sound crazy, scientists discovered some crazy-sounding things that make a lot of sense,” Marc Abrahams, master of ceremonies and editor of the magazine, said in an e-mail interview.

The ceremony started with Kees Moliker, winner of 2003 Ig Noble for biology, giving out safety instructions. His prize was for a study that documented the existence of homosexual necrophilia in mallard ducks.

“This is the duck,” he said, holding up a duck. “This is the dead one.”

After that, someone came on stage wearing a yellow target on their chest and a plastic face mask. Soon, they were inundated with people in the audience throwing paper airplanes at them.

Then, the awards began — several dry presentations which were interrupted by a girl coming on stage and repeatedly yelling “Please stop. I'm bored.” The awards ceremony was also was broken up by an international song competition inspired by Murphy's Law, including one about coleslaw and another about the legal system.

The winners were honored in 10 categories, including for peace and anatomy. Among them were scientists who showed a vine from Chile imitates the shapes of artificial plants nearby and another study that examined whether the hair on people's heads in the Northern Hemisphere swirled in the same direction as someone's hair in the Southern Hemisphere.

Other winners include a group of scientists who showed that fake medicine that causes side effects can be more effective than fake medicine that doesn't cause side effects and one showing that some mammals are cable of breathing through their anus — winners who came on stage wearing a fish-inspired hats.

Julie Skinner Vargas accepted the peace prize on behalf of her late father B.F. Skinner, who wrote the pigeon-missile study. Skinner Vargas is also the head of the B.F. Skinner Foundation.

“I want to thank you for finally acknowledging his most important contribution,” she said. “Thank you for putting the record straight.”

James Liao, a biology professor at the University of Florida, accepted the physics prize for his study demonstrating and explaining the swimming abilities of a dead trout.

“I discovered that a live fish moved more than a dead fish but not by much,” Liao said, holding up a fake fish. “A dead trout towed behind a stick also flaps its tail to the beat of the current like a live fish surfing on swirling eddies, recapturing the energy in its environment. A dead fish does live fish things.”

Professor James Liao displays a stuffed fish while accepting a prize for physics for demonstrating and explaining the swimming abilities of a dead trout during a performance at the Ig Nobel Prize ceremony at Massachusetts Institute of Technology in Cambridge, Mass., Thursday, Sept. 12, 2024. (AP Photo/Steven Senne)

A team of researchers perform a demonstration during a performance showing that many mammals are capable of breathing through their anus while accepting the 2024 Ig Nobel prize in physiology at the Ig Nobel Prize ceremony at Massachusetts Institute of Technology, in Cambridge, Mass., Thursday, Sept. 12, 2024. (AP Photo/Steven Senne)

People in the audience throw paper airplanes toward the stage during a performance at the Ig Nobel Prize ceremony at Massachusetts Institute of Technology in Cambridge, Mass., Thursday, Sept. 12, 2024. (AP Photo/Steven Senne)

FILE - Students walk past the "Great Dome" atop Building 10 on the Massachusetts Institute of Technology campus in Cambridge, Mass, April 3, 2017. (AP Photo/Charles Krupa, File)