PRISM Market Report: Markets Surge on Dovish Powell; Small Caps Lead Rally

U.S. equities rebounded sharply on Friday, breaking a five-day losing streak, as Federal Reserve Chair Jerome Powell’s Jackson Hole speech struck a more dovish tone than markets anticipated.

At midday, the Dow Jones Industrial Average was up 1.97%, the S&P 500 gained 1.45%, the Nasdaq Composite rose 1.63%, and the Russell 2000 surged 3.70%, with small caps emerging as the biggest beneficiaries of easing rate expectations. Sector strength was broad-based, with notable gains in builders, semiconductors, retailers, apparel, auto parts, travel and leisure, transports, building materials, machinery, chemicals, oil services, private equity, and regional banks. Consumer staples was the only sector trading lower.

Treasuries rallied with the curve steepening, as front-end yields fell roughly 9–10 basis points. The dollar index slipped 0.9%, gold rose 1.1%, Bitcoin futures gained 3.8%, and WTI crude edged 0.1% higher.

Powell’s Speech Reignites Rate Cut Bets

Investor sentiment was buoyed by Powell’s remarks, which emphasized a “shifting balance of risks” that may warrant policy adjustment. He also acknowledged rising downside risks to employment while downplaying the inflationary impact of tariffs, which he described as short-lived. The market interpreted his comments as dovish, with the probability of a September rate cut jumping more than 20 percentage points on the day to above 90%.

Other Fed officials also weighed in. Boston Fed President Susan Collins noted that the central bank “can’t wait for all uncertainty to be resolved before making decisions,” attempting to temper fears about inflation expectations while reinforcing the Fed’s readiness to act.

Corporate Headlines

Earnings takeaways remained mixed and company-specific. Retail results dominated the week, reinforcing the theme of consumer resilience. Notable developments included:

Nvidia (NVDA) reportedly told suppliers to halt production related to its H20 chips as China accelerates efforts to promote domestic alternatives.

Alphabet (GOOGL) reportedly secured a $10 billion, six-year cloud contract with Meta Platforms (META).

Starbucks (SBUX) is said to expect bids for its China business within two weeks.

Workday (WDAY) reported Q2 subscription revenue and cRPO ahead of expectations, though FY26 guidance raised largely due to its Paradox acquisition drew some scrutiny.

Intuit (INTU) delivered a strong Q4, though FY26 guidance fell short amid continued Mailchimp headwinds.

Zoom (ZM) was boosted by stronger enterprise segment performance.

Ross Stores (ROST) reinstated guidance after Q2 results slightly beat expectations, highlighting a sharp July rebound and positive back-to-school trends.

Cevian Capital disclosed a 3% stake in Akzo Nobel (AKZOY), fueling speculation of activist involvement.

Looking Ahead

The U.S. economic calendar was light Friday, but next week brings a wave of macro updates. Monday features new home sales and the Dallas Fed manufacturing index. Durable goods orders, FHFA house price index, Richmond Fed manufacturing, and consumer confidence follow on Tuesday. Later in the week, investors will parse Q2 GDP revisions, jobless claims, pending home sales, and—most importantly—the July personal income and spending report, with core PCE inflation set to provide the next key read on Fed policy.

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