Stocks were already trading higher after the release of December labor data that showed job and wage growth were still solid despite the market's effort to convince investors otherwise.
"Despite this dovish tone, we are skeptical", Schenker said in a note.
Powell's appearance in Atlanta was his first since last month's rate increase and a public lashing from Trump, who according to sources asked aides about his power to fire the Fed chairman.
Both of those messages cheered stock market investors who had been anxious about Trump's repeated attacks on his hand-picked choice to lead the nation's central bank and also the Fed's seemingly inexorable march to higher rates.
Analysts predicted that job reports for January and February will be more of a policy reference for the Fed than the December report as they would provide a clearer picture of how tightened financial conditions affect the US economy.
The Dow Jones Industrial Average climbed 746.94 points (3.29 per cent) to end the week at 23,433.16.
"We are always prepared to shift the stance of policy and to shift it significantly" if needed, said Powell, who spoke on a panel in Atlanta alongside former Fed chiefs Janet Yellen and Ben Bernanke.
"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", he told the American Economic Association, adding that the Fed is not on a preset path of tightening policy and suggesting it could pause rate hikes as it did in 2016. The Federal Reserve also indicated that it would press ahead with plans for more interest rate hikes in 2019.
The U.S. central bank hiked interest rates four times last year, including in December when policy-makers' forecasts pointed to two more rises this year.
The president's attacks had become so intense that they had raised concerns that he might be considering firing Powell, a development which could send the market into a tailspin.
From rising wages to a slowdown in housing, economic evidence is mounting that the U.S. Federal Reserve is at or near a neutral level of interest rates where it can take stock of where the economy stands before deciding on its next moves, Cleveland Federal Reserve president Loretta Mester said.
Her comments, from a sometimes hawkish Fed official, highlighted the change in tone at a central bank that, after two years of roughly quarterly rate increases, was now assessing the risks of going too far. But some investors have anxious that that process could push long-term rates higher at a time when the economy was slowing.
Powell "said exactly what the markets wanted to hear", said Gregori Volokhine of Meeschaert Financial Services.
In response to questions, Powell also signaled a willingness to include changes to the Fed's gradual run-off of its balance-sheet in any review of monetary policy. Asked if he had had any face-to-face meetings with Trump, Powell said he had not although he said previous Fed leaders have had discussions from time to time with previous presidents.