Jerome Powell knows his job doesn’t get much applause. Normally, the chairman of the Federal Reserve is a bearer of bad news, like: inflation is way too high and the Fed is going to destroy it.

But his speech Friday in Jackson Hole, Wyo., drew cheers for the Federal Reserve chairman on Wall Street — and everywhere else, too. Just as important, the speech sparked a big, fat stock rally that made many smaller stocks look like stars.

The performance of the major indexes doesn’t tell the whole story. The S&P 500, the Nasdaq Composite and the Dow Jones industrials each rose more than 1.1%. The Dow and S&P ended the day just below their mid-July highs.

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But the real picture was bigger:

• The Russell 2000 Index, which has been ridiculed for most of the year, rose 3.2%.
• The NYSE Arca Airline Index, whose members struggle with oil price fluctuations and frequently face adverse economic conditions, rose 3.74%.
• The Philadelphia Housing Sector Index rose 3.73%.
• All 11 sectors of the S&P 500 closed higher for the day, led by real estate, which rose 2%.
• Interest rates fell as bond prices rose. The 10-year Treasury yield fell to 3.80%, just above the 52-week low of 3.67% on Aug. 5 but down from nearly 5% in October.
• Data from Barchart.com shows that 335 stocks hit their 52-week highs on Friday, while only 53 stocks hit their 52-week lows.

And all because Jerome Powell told a gathering of central bankers from around the world — and a national TV audience — “The time has come to change policy. The direction we’re going is clear.”

Cutbacks are coming soon

The rate cuts are likely to be formally approved at the Fed’s Sept. 17-18 meeting. The first cut is likely to be a quarter of a percentage point.

The Fed’s key interest rate would fall to 5% to 5.25% from 5.25% to 5.5%. But Powell strongly suggested more rate cuts are coming. The Fed, the chairman said, “does not seek or welcome further cooling in labor market conditions.”

Powell’s speech has created an interesting moment for many investments.

Lower interest rates mean that the capital costs of starting a business, building a new factory or buying a home are becoming less onerous. The rate on 30-year mortgages was below 6.5% on Friday.

But rates could fall and generate more buying and selling. The key is getting rates on 30-year mortgages below 6%, real estate professionals said Friday. That’s a level they believe will prompt more homeowners to put their properties on the market.

Real estate-related stocks and ETFs rose. Redfin (RDFN) the online real estate broker, rose 18.9% to $11.08. Rival Zillow Group (Z) rose 5.2% to $56.35.

More economic analyses:

• Kamala Harris sees market stars turning on Donald Trump
• CPI report upsets bets on big Fed rate cut
• Main Street businesses fight back against Wall Street recession

Both companies benefit from increased sales volume, but don’t expect Zillow to race back to its all-time high closing price of $199.90 anytime soon. That peak was reached during the Covid-19 pandemic, when meme stocks took over the stock market.

A big winner: housing

The SPDR S&P Homebuilders ETF (XHB) which primarily invests in home builders and building materials suppliers such as Home Depot (HD) Lowe’s Companies (LOW) and Johnson Controls (JCI) jumped 4.3% on Friday. The ETF is up 24.6% this year.

That beats the Dow (up 9.3%), the S&P 500 (up 18.1%) and the Nasdaq (up 19.1%). Falling rates should help the bottom lines of all 35 components in the ETF.

Carnival Cruise, which operates the Carnival Liberty, paid $2 billion in interest on its debt in the last fiscal year.

Image source: Shutterstock

Investors are bidding up shares in two major cruise lines, Norwegian Cruise Line Holdings (NCLH) and Carnival Cruise Line (CCL) . Norwegian rose 7.76% to $17.50. Carnival rose 7.5% to $16.61.

The reason: Lower interest rates reduce the interest costs they pay on loans to buy ships and finance other activities.

In fiscal 2023 (which ended in November), Carnival said it paid $2.07 billion in interest. The company had $31.34 billion in debt that came due between 2024 and 2031.

Lower interest costs therefore have a positive effect on earnings per share and share prices.

Assuming inflation remains under control, as it was for most of the years between 2000 and 2020, that’s what investors can expect. For the record, the annual gain for the consumer price index averaged 2.15% between 2001 and 2021, according to data from the Federal Reserve Bank of St. Louis.

Related: Fed Chair Powell Signals Rate Cuts