The stock market rallied today after Fed Chair Powell's speech at the Jackson Hole symposium bolstered the probability of a September rate cut, resulting in broad-based gains that largely made up for a previously challenging week.

The DJIA (+1.9%) soared past its record high levels, posting a new record intraday (45,757.84) and closing high (45,631.74). Meanwhile, the S&P 500 (+1.5%) came within three points of its own all-time high level before finishing just shy of its record close. The tech-heavy Nasdaq Composite (+1.8%) still has some ground to cover before it goes record hunting again due to losses incurred earlier in the week.

In particular, the market was enthused by Mr. Powell's line noting that "with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," which the market took as an open-mindedness to easing.

The probability of a 25-basis point rate cut at the September FOMC meeting now stands at 83.1%, up from 75.0% yesterday, according to the CME FedWatch tool.

It is worth noting that this probability did decrease somewhat from a probability in the low 90s earlier in the day, as there are still lingering inflation concerns that could stifle a rate cut. 

Cleveland Fed President Beth Hammack (non-voting FOMC member) expressed a more hawkish view in a CNBC interview, in which she stressed that while she is open-minded heading into September, her focus remains on inflation, where she feels the Fed is still missing badly on its mandate. 

However, this did little to thwart the stock market off its strong upward course.

Small-cap stocks, with their greater domestic focus and higher sensitivity to borrowing costs, performed exceptionally well.

The Russell 2000 advanced 3.8% today, making it the top performer among the major averages for the week after starting the session with a modest week-to-date loss.

Homebuilders also excelled with the prospect of a friendlier rate environment, with the iShares U.S. Home Construction ETF posting a 5.6% gain.

The S&P Mid Cap 400, for its part, added 2.7%.

The Invesco S&P 500 High Beta ETF added 3.3% today, reinforcing the market's strong risk-on sentiment. 

While the Vanguard Mega Cap Growth ETF (+1.5%) performed more in line with the broader market, mega-cap gains were a welcome sight after a tough week that saw the mega-cap index finish with a 1.1% week-to-date loss. 

Tesla (TSLA 340.02, +19.91, +6.22%) was a notable standout among the cohort, surging past its 200-day moving average (328.40) and helping the consumer discretionary sector (+3.2%) capture the widest gain today.

In total, ten S&P 500 sectors finished with gains, with the energy (+2.0%), communication services (+1.9%), materials (+1.7%), and financials (+1.7%) sectors among the best performers.

The PHLX Semiconductor Index advanced 2.7% after several choppy previous sessions, getting back to its unchanged level for the week. 

Only the defensive consumer staples sector (-0.4%) saw a modest loss.

Breadth figures denote the scope of today's rally, with advancers outpacing decliners by a nearly 10-to-1 margin on the NYSE and a greater than 5-to-1 clip on the NASDAQ. 

Today's rally reinforces investor optimism for potential policy easing and sets a positive tone as traders position for the final stretch of August.

U.S. Treasuries enjoyed a strong Friday outing that lifted the 10-year note and shorter tenors into positive territory for the week while the long bond added to this week's gain.

The 2-year note yield settled down ten basis points to 3.69%, the 10-year note yield settled down seven basis points to 4.26%, and the 30-year note yield settled down four basis points to 4.88%.

There was no economic data of note today.

• Nasdaq Composite: +11.3% YTD
• S&P 500: +10.0% YTD
• DJIA: +7.3% YTD
• Russell 2000: +5.9% YTD
• S&P Mid Cap 400: + 4.3% YTD