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The stock market surged on Thursday, with the Dow Jones Industrial Average and the S&P 500 hitting new record highs after the Federal Reserve cut interest rates by 50 basis points. The Dow climbed 522.09 points (1.26%) to close at 42,025.19, breaching the 42,000 level for the first time, while the S&P 500 gained 1.7% to finish at 5,713.64, marking its first-ever close above 5,700. Meanwhile, the Nasdaq Composite jumped 2.51%, closing at 18,013.98.
The rate cut ignited optimism that the Fed is managing a soft landing for the economy. Weekly jobless claims fell by 12,000 to 219,000, further supporting this sentiment.
Tech Stocks Surge: Big Tech benefited from the Fed’s decision, with Nvidia and AMD climbing nearly 4% and 6%, respectively, and Meta Platforms and Alphabet advancing by 3.9% and 1.5%. Micron Technology also saw a boost, rising by 2.2%.
Rate-Sensitive Stocks Rally: Stocks tied to a stronger economy following rate cuts also performed well, with JPMorgan Chase gaining 1.4%, Caterpillar up 5.1%, and Home Depot rising 1.7%.
This 50bps rate cut, lowering the overnight lending rate to 4.75%-5.00%, is the first reduction from the Fed in four years. Although it surprised some investors, the market responded with enthusiasm, especially given the potential boost to earnings growth and small-cap stocks. Timothy Chubb, CIO at Girard Advisory Services, noted that many companies stand to benefit from this shift in monetary policy, adding, “We were getting a little long in the tooth with some of the earnings growth estimates.”
