Stocks closed sharply higher on Friday after Fed Chair Jerome Powell's Jackson Hole speech.

All of the major indexes soared in excess of 1.50% or more. The small-cap Russell 2000 was the biggest gainer with a whopping 3.86%, making a new YTD high in the process. And all of the major indexes, sans the Nasdaq, were up for the week (although the Nasdaq only missed the mark by -0.58%).

The Nasdaq, however, is still the top performing index YTD with 11.3%, followed by the S&P 500 with 9.95%, and the Dow with 7.26%. The Russell 2000 is up 5.91%, and the mid-cap S&P 400 is up 4.33%.

Mr. Powell's Jackson Hole speech on Friday morning sent the market soaring as he indicated the Fed might be warranted to cut rates at their next meeting on September 16-17.

In short, he noted that while inflation is still elevated, the risks to the labor market have increased, echoing the concerns that Fed Governors Christopher Waller and Michelle Bowman cited at the last meeting in July (which was the first time more than 1 board member dissented from the majority in more than 30 years ? in this case voting to cut rates last month vs. the consensus to keep rates steady yet again).

Curiously, Mr. Powell's speech wasn't the ringing endorsement for the economy one would think would ignite a rally. Instead, it was the shifting concerns of their dual mandate (jobs over inflation) that sent the market soaring.

But that's because the Fed acknowledges that the "base case" remains that the recent price increases (which are showing up in moderate rises in inflation) will be a "one-time" shift due to tariffs, rather than ongoing increases marked by persistent inflation.

And the market cheered the news. While inflation is still too high, core inflation (whether looking at CPI, PPI or PCE) remains within a few tenths of a percent (either above or below) their readings from just several months ago, defying fears, so far, that tariffs would send prices significantly higher.

However, the last employment report, which came in under expectations, not to mention the lowered revisions from months prior, have begun to worry the market. And the Fed's public shift to make sure employment remains robust (their dual mandate requires them to keep stable prices and maximize employment), sent a signal to the market that they will do everything they can to ensure the economy doesn't falter.

But a rate cut in September is not a done deal. As always, the Fed maintains it will be data dependent. And that means, the next Personal Consumption Expenditures (PCE) report (which is the Fed's preferred inflation gauge) on Friday, 8/29, and the next Employment Situation report on Friday, 9/5, could influence their decision come meeting time. But inflation would likely have to come in well above expectations, with jobs gains sharply higher, for the Fed to sit on rates yet again. But you never know. So all eyes will be on those next two reports.

Earnings season continues this week with another 322 companies on deck to report. But it will 'officially' come to an end on Wednesday, 8/27 when NVIDIA reports after the close. All eyes will be on them not just to see their results, but because they have become a bellwether for the semiconductor industry and the AI trade.

Should be a busy week.

See you tomorrow,