Wall Street surged on Friday after Federal Reserve Chair Jerome Powell suggested that interest rate cuts might be on the horizon, sending ripples of optimism through financial markets. Investors interpreted Powell’s remarks as a signal that the Fed could ease monetary policy soon, a move that typically encourages borrowing, spending, and investment, even if it carries the risk of higher inflation.

The Dow Jones Industrial Average led the charge, soaring 846.24 points, or 1.9%, to close at a record 45,631.74, while the S&P 500 climbed 96.74 points, or 1.5%, to 6,466.91, just shy of last week’s all-time high. The Nasdaq composite gained 396.22 points, or 1.9%, finishing at 21,496.53, and the Russell 2000 index of smaller companies surged 87.85 points, or 3.9%, to 2,361.95.

Treasury yields fell as bond investors reacted to the prospect of lower interest rates, reflecting the market’s preference for cheaper borrowing costs, which can stimulate economic activity and lift asset prices. Analysts noted that the market rally was broad-based, encompassing both large-cap and smaller-cap stocks, with tech-heavy Nasdaq and growth-oriented Russell 2000 showing particularly strong gains.

Looking at the weekly performance, the S&P 500 added 17.11 points, or 0.3%, the Dow rose 685.62 points, or 1.5%, the Nasdaq slipped 126.44 points, or 0.6%, while the Russell 2000 advanced 75.43 points, or 3.3%. Year-to-date, major indices continue to post solid returns, with the S&P 500 up 585.28 points (10%), the Dow up 3,087.52 points (7.3%), the Nasdaq up 2,185.74 points (11.3%), and the Russell 2000 up 131.79 points (5.9%).

The market response underscores investor enthusiasm for potential Fed easing, reflecting hopes for sustained economic growth and robust corporate earnings as traders weigh the delicate balance between stimulating the economy and managing inflation pressures.