Stocks reached fresh record highs after Federal Reserve Chair Powell hinted at a potential September interest-rate cut. The Dow Jones Industrial Average surged 846 points, with the S&P 500 and Nasdaq also posting gains. Investors shifted focus to technology and small-cap stocks, anticipating benefits from lower borrowing costs.

Prior to the surge, the S&P 500 experienced a five-day losing streak, its longest since January. Powell’s remarks at the Jackson Hole Economic Policy Symposium highlighted concerns about a weakening labor market, signaling a possible rate cut next month. He also addressed potential inflation risks from tariffs.

The Fed aims to bring inflation closer to its 2% target, with recent data showing signs of rising inflation from service costs. Traders are pricing in an 85.2% chance of a rate cut in September. Despite the stock market rally, there are concerns about the market’s rich valuation and its sustainability.

While a rate cut may not guarantee lower long-term interest rates for consumers, markets are more focused on the jobs market than inflation. Treasury yields fell, gold prices rose, and the dollar weakened after Powell’s speech. Investors remain cautiously optimistic about the economy’s trajectory post-pandemic.

Read more at Yahoo Finance: The stock market soared following Fed Chair Powell’s speech. Why it might just be a ‘late-summer rally.’