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Fed's Powell says 'time has come' to cut interest rates

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Small caps, regional banks surge

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Workday jumps after Q2 revenue beat, $1 bln share buyback

plan

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Indexes up: Dow 0.90%, S&P 500 0.88%, Nasdaq 1.21%

By Stephen Culp

NEW YORK, Aug 23 (Reuters) - U.S. stocks rallied on

Friday as dovish remarks from U.S. Federal Reserve Chair Jerome

Powell solidified expectations that the central bank will cut

its key policy rate in September.

In highly anticipated remarks before the Jackson Hole

Economic Symposium, Powell said "the time has come" to lower the

Fed funds target rate, and "the upside risks of inflation have

diminished."

"We do not see or welcome further weakening in labor market

conditions," Powell added in a speech that appeared to all but

guarantee a rate cut at next month's policy meeting, the first

such cut in over four years.

"This is a dovish Powell today, and we see markets

responding accordingly," said Peter Cardillo, chief market

economist at Spartan Capital Securities in New York. "What he's

suggesting here is if the labor market continues to weaken,

we're looking at a 50 basis-point rate cut in September as

opposed to 25."

All three major U.S. stock indexes extended their gains

after the release of Powell's prepared remarks, with megacaps

Nvidia ( NVDA ), Apple ( AAPL ) and Tesla providing the

most muscle.

Small caps and regional banks were outperformers,

jumping 3.1% and 4.9%, respectively.

"We're having a minor rally after yesterday's pullback,"

said Jay Hatfield, portfolio manager at InfraCap in New York.

"We're seeing the rally you'd expect in interest rate-sensitive

stocks."

All three indexes are on track to log weekly advances,

standing on the shoulders of last week's largest

Friday-to-Friday percentage gains of the year.

Next week, the data-dependent Fed will have a raft of

economic indicators to consider ahead of its September rate

decision, including the Commerce Department's revised

second-quarter GDP and its broad-ranging Personal Consumption

Expenditures (PCE) report, which includes the Fed's preferred

inflation yardstick, the PCE price index.

At 2:19 p.m. EDT, the Dow Jones Industrial Average

rose 366.71 points, or 0.9%, to 41,079.49, the S&P 500

gained 48.88 points, or 0.88%, to 5,619.52 and the Nasdaq

Composite added 212.52 points, or 1.21%, to 17,831.87.

Among the 11 major sectors in the S&P 500, all but consumer

staples were in positive territory. Real estate shares

were boasting the largest percentage gain.

Workday beat quarterly revenue expectations and

announced a $1 billion stock buyback plan, sending shares of the

human resources software firm up 11.9%, the biggest percentage

gainer on the Nasdaq.

Ross Stores ( ROST ) gained 2.1% after the discount retailer

raised its fiscal 2024 profit forecast.

Turbo Tax's parent Intuit sagged 6.9% in response

to disappointing quarterly revenue.

Advancing issues outnumbered declining ones on the NYSE by

an 8.19-to-1 ratio; on the Nasdaq, a 3.77-to-1 ratio favored

advancers.

The S&P 500 posted 74 new 52-week highs and no new lows; the

Nasdaq Composite recorded 136 new highs and 38 new lows.