Market expectations for a rate cut had trembled after last week's report, better than expected. An economy with a healthy labor market should need encouragement.
The central bank is expected to lower rates to boost the economy at its July 31 meeting, but Wall Street is still debating whether it will be a quarter-percentage point cut or half a point. CME's FedWatch tool suggests a 78% probability for a quarter-point cut.
Stocks started the week lower before Powell came to the rescue. The central banker pointed out the uncertainties surrounding trade and global growth, and also noted that inflation remained below the target. When consumer price inflation for June rose to 2.1% on Thursday, Powell remained firm and stocks recovered further.
"Powell's appearance on Wednesday was very well received, as the Fed president gave us a message as moderate as he would make it possible," said Craig Erlam, senior market analyst at Oanda in a note.
"There was no attempt to discourage investors from pricing in a July cut, so it seems as certain as you can expect."
Investors seem encouraged that it is not the last cut. Powell's darker assessment of the outlook seems to indicate future cuts.
On Friday, the June producer price index, another measure of inflation, fell to 1.7% year-on-year, down from the previous month.
The Dow opened 0.2%, or 63 points, higher. The S & P rose 0.1% in the open and the Nasdaq Composite rose 0.2%. Both the Dow and the S & P also set new records within the day in the first few seconds of trading.
The three benchmarks already reached a closing record this week, while the Dow climbed above 27,000 points and the S & P 500 topped 3,000 for the first time.