U.S. stocks climbed to record highs on Thursday as Wall Street shook off uncertainty about the previous day’s big rate cut by the Federal Reserve.
The S&P 500 jumped 1.7% to close above 5,700 for the first time. The Dow Jones Industrial Average rose 1.2% to close at a record 42,025. The Nasdaq Composite surged 2.5% to close above 18,000 for the first time since July. Markets were lifted by soaring tech mega caps like Nvidia (NVDA), up 4%, and Apple (AAPL), which rose 3.5%.
The Fed on Wednesday cut its benchmark federal funds rate by 50 basis points, its first rate reduction in more than four years. The cut was widely expected by economists and investors, though there was unusual uncertainty about its magnitude before yesterday’s announcement. Market odds suggested Wall Street thought a large cut was more likely than a smaller 25-point one, but few economists predicted that policymakers would charge out of the gate the way they did.
Fed officials expect to cut interest rates another half percentage point by the end of the year, according to a survey of policymakers that was released alongside the rate decision. Traders, meanwhile, expect even deeper cuts.
Investors weren’t quite sure what to make of Wednesday’s decision. The major stock indexes swung throughout Fed Chair Jerome Powell’s post-meeting press conference before ultimately turning lower to close down slightly.
On Thursday, Treasury yields rose after data showed 219,000 people filed initial unemployment claims in the week ending September 14, a decrease from the week before and fewer than expected.1 Weekly unemployment claims can be volatile and are generally less indicative of the labor market’s health than other data points. Still, the report was not a promising sign for traders betting on more aggressive rate cuts.
Cryptocurrencies were sharply higher on Thursday as markets embraced risk in the face of more accommodative monetary policy.
International stocks advanced. Japan’s Nikkei 225 rose more than 2%. European and British stocks advanced 1.4% and 0.9%, respectively.
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