U.S. stocks hit a record high on Thursday as Wall Street finished trading before a key jobs report, which could open the door for interest rate cuts that investors welcome.

The new record heights with traders becoming increasingly confident that the Federal Reserve would cut interest rates earlier. The rally was a response to comments by Fed Chairman Jerome Powell that monetary policy can be relaxed in case the labor market gets worse. The negative indications of declining hiring and the economy have increased expectations that borrowing expenses will fall.

Market Performance and Investor Mood

The Dow Jones Industrial Average rose 846 points, or 1.9%, to 45,631.74. It was its highest level since December 2024, a welcome bounce for the blue-chip average.

The S&P 500 rose 1.5%, almost reaching its record high, while the Nasdaq Composite gained 1.9%, breaking a six-day losing streak. The S&P’s jump was its best since May. Smaller companies also saw strong gains, with the Russell 2000 rising 3.9%, as investors looked to sectors that benefit most from cheaper loans.

Powell’s Dovish Tone Brings Optimism

Speaking at the Jackson Hole central banking conference, Powell warned that risks to jobs are rising and said the Fed may need to take a softer stance if the job market weakens further. He reminded that inflation is still above the 2% goal but stressed that supporting the economy and protecting jobs is also important. Investors took his “dovish” message as a sign that the Fed could begin cutting rates as early as September 2025.

Rate-Cut Hopes Lift Key Sectors

Industries that benefit from lower interest rates saw sharp gains. Homebuilders such as Lennar, PulteGroup, and D.R. Horton all increased by over 5% because inexpensive loans would lure more purchasers to the housing industry.

Travel and tourism stocks also increased, as Norwegian Cruise Line, Delta Air Lines, and Caesars Entertainment climbed 6.7% to 7.2%. Tech stocks were also strong: Nvidia trimmed losses earlier in the day, Intel bounced after winning government support, and Chinese electric car maker Nio leapt over 14% on reports of new offerings.

Bonds and Inflation Picture

Treasury yields fell as traders rushed to buy bonds, expecting the Fed to ease policy. The 10-year Treasury yield dropped after weaker job numbers suggested the economy is slowing down. Inflation data, however, gave mixed signals. Economists warned that tariffs and other factors may keep prices tricky to control, even if growth slows.

Global Impact and What is Next

The record U.S. rally lifted Asian markets and boosted global confidence. Investors are now waiting for key reports, especially U.S. jobs data, which could confirm a weakening labor market. That would give the Fed more reason to cut rates later this month. Analysts now say there is more than an 80% chance that the Fed will deliver its first rate cut of 2025, a move that could give markets strong momentum through the end of the year.