There were concerns that the data would let the Fed stick with its projection for two interest rate hikes in 2019, but traders kept bets that the central bank will hold fire this year and begin cutting rates in 2020.
"Particularly with the muted inflation readings that we've seen coming in, we will be patient as we watch to see how the economy evolves", Powell told the American Economic Association in Atlanta. "Powell is definitely trying to calm the markets".
"His (Powell's) comments are being interpreted as dovish", said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
The Dow Jones industrial average finished the day up 746 points or 3.3 per cent. Sliding equity prices, weakness overseas and mixed economic data at home have prompted calls for the Fed to put rates on hold, but the USA labor market remains strong.
US President Donald Trump has been one of the loudest critics of the rising rates, which raise the cost of borrowing and risk dampening economic growth.
The head of the Fed, once confirmed by the Senate, can only be removed "for cause", not a policy disagreement.More news: Trump will bring troops home from Syria 'slowly'
Powell, who was appointed by Trump, also said he had not received any direct word from the White House about his job performance, and that no meeting with the president had been scheduled.
"We are always prepared to shift the stance of policy and to shift it significantly" if needed, Powell said, speaking on a panel alongside former Fed chiefs Janet Yellen and Ben Bernanke.
US stocks were pummelled on Thursday after Apple slashed its revenue forecast due to weak demand in China and a report showed US manufacturing activity slumping to a two-year low, reviving fears about a global economic slowdown in the wake of the US-China trade war. Data released earlier on Friday showed U.S. employers added the most workers in 10 months as wage gains accelerated.
"It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike".
Powell said the Fed will act on the current normalization of the balance sheet if conflicts with the Fed's goals arise.
"The problem in my opinion is Treasury and the Fed", Trump said.