Market Wrap | Federal Reserve Hints at September Rate Cut Sparking Market Rally

On August 22, 2025, the Federal Reserve Chair Jerome Powell hinted at a potential rate cut in September due to rising risks in the job market, despite ongoing inflation concerns. This dovish stance was echoed by Deutsche Bank, which also anticipates a 25 basis point cut in September, with further cuts possible in December and March. Markets responded positively, with the S&P 500 rising 1.52%, the Dow Jones rising 1.89%, and the Nasdaq rising 1.88%.

In today's market, several sectors outperformed the S&P 500, including non-essential consumer goods, energy, materials, industrials, real estate, and financials. Notably, the non-essential consumer goods and energy sectors showed exceptional performance. Conversely, the essential consumer goods sector moved in the opposite direction of the S&P 500.

Federal Reserve Chairman Jerome Powell indicated potential interest rate cuts in September due to rising employment market risks, leading to significant gains in U.S. stock indices. Following Powell's speech, Deutsche Bank economists predict a 25 basis point cut in September, with possible additional cuts in December and March. President Trump criticized Powell for signaling rate cuts too late and increased pressure on Federal Reserve officials, including threatening to dismiss board member Lisa Cook. Additionally, traders are increasingly betting on a September rate cut, with the probability rising to 91.1%, reflecting market expectations of monetary policy adjustments.