- Fed Chair Powell signaled at Jackson Hole that an interest rate cut is imminent.
- Most of the market expects a 25bps cut, but a third still says Powell will begin with 50 bps.
- Powell says that labor market no longer a source of inflation.
- Goldman nears all-time high at $517.26, but entry points are aplenty.
Goldman Sachs (GS) gained alongside US indices on Friday after the market took Federal Reserve (Fed) Chair Jerome Powell’s words to heart regarding interest rate cuts at the September 18 meeting.
Shares of the esteemed investment bank added nearly 3% to reach an intraday high of $512.44 just before lunchtime.
The Dow Jones Industrial Average, of which Goldman is an outsized member, advanced by half a percentage point, and the NASDAQ and S&P 500 gained a similar amount.
Dow Jones jumps after Fed gives a nod to rate cuts
Jackson Hole, Powell presser lifts market
Firm news plays second fiddle on days like Friday, when the market unearthed more certainty that an interest rate would arrive in less than a month. The expectation was already there, but Powell’s straight talk solidified the existing sentiment.
The CME Group’s FedWatch Tool puts the odds of a 25 bps cut at 66% for the September meeting and a 50 bps cut at 34%.
“The time has come for policy to adjust," Powell told the packed audience at the Jackson Hole Economic Symposium in Wyoming. "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.”
Charlie Ripley of Allianz focused on Powell’s insight that the labor market was unlikely to be a source of medium-term inflation.
"While the pace and magnitude [of the cuts] has yet to be determined,” Ripley wrote in a client note, “it has been made very clear that the shift in focus has moved toward the labor market and the broader trajectory of the US economy."
Little has happened in the headlines for Goldman this week other than the light embarrassment over Ken Griffin’s Citadel hedge fund hiring away the bank’s chief technology officer. Atte Lahtiranta has been with Goldman since 2019 and will now become the principal officer in charge of Citadel’s trading and risk algorithms.
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
Goldman Sachs stock chart
Goldman's share price has risen some 31% already this year, so most traders will want to wait for a pullback before entering on the long side. Of course if GS stock overtakes $517.26, the high from July 31, then they will have missed their chance.
The primary points of interest for bulls are the 50-day Simple Moving Average (SMA), which is gliding near $480. Below there is the $471 prior resistance from May and the summer support level of $440 that stood tall in both June and early August.
Goldman Sachs daily stock chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD challenges YTD tops near 1.1170 on Powell
EUR/USD now picks up extra pace and revisits the 1.1170 region after Chief Powell somewhat “confirmed” a rate cut next month at his speech at Jackson Hole.
GBP/USD reaches new 2024 highs around 1.3200, Dollar plummets
The Greenback is now accelerating its decline and flirts with the area of 2024 low as Chair Powell signals that it is time to adjust monetary policy. GBP/USD picks up extra pace and challenges the 1.3200 region, clinching new 2024 peaks at the same time.
Gold keeps the bid bias unchanged above $2,500
The precious metal maintains its bullish stance in place on Friday, climbing above the $2,500 mark per ounce troy as Fed’s Powell signals an imminent rate cut.
Decentraland price is set for a rally after breaking above the descending trendline
Decentraland (MANA) price broke above the descending trendline and trades up 1.5% as of Friday at $0.291. Additionally, on-chain data support further price gains, as MANA's Exchange Flow Balance shows a negative spike, and the long-to-short ratio stays above one.
Jerome Powell expected to hint at upcoming interest-rate cut in September
Market participants will closely scrutinize Powell’s speech for any fresh hints on the trajectory of monetary policy, particularly about the magnitude of the Fed’s first interest-rate cut in years.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.