US stocks surged, marking a significant moment as the Dow Jones Industrial Average crossed the 42,000 mark for the first time, fueled by optimism surrounding the Federal Reserve’s substantial interest rate cut, which is anticipated to lead to a “soft landing” for the US economy.
The S&P 500 rose approximately 1.9%, and the Dow gained more than 1.4%, both indices reaching new record highs. The Nasdaq Composite, known for its heavy tech representation, led the upswing with an increase of 2.8%.
The rally reflects investor confidence in the Fed’s decision to initiate a rate reduction cycle with a 50 basis point cut. Following the Fed’s policy announcement, there was a brief dip in the market before it closed lower.
Investors have absorbed Chair Jerome Powell’s message that a significant rate cut in a relatively stable economy may help avert a recession, signaling confidence rather than concern over current economic conditions.
Bank of America has revised its forecast, now projecting the Fed will reduce rates by 0.75% by year’s end, up from a previous estimate of 0.50%. In contrast, the Fed’s “dot plot” suggests policymakers are expecting only a half-percentage-point reduction.
Shares of rate-sensitive growth stocks saw positive movement in premarket trading, particularly major tech players that have dominated this year’s market surge. Noteworthy gains were seen in Alphabet, Microsoft, and Meta, while Apple rose over 3%. Tesla and Nvidia also recorded significant increases.
With the Fed’s pivot, market participants are once again tuning into economic data releases, preparing for potential market fluctuations. A recent Labor Department report revealed initial jobless claims dropped to their lowest level in four months. For the week ending September 19, claims fell to 219,000, with the previous total adjusted to 231,000.
Shares of consumer packaged goods companies such as Procter & Gamble, PepsiCo, and Hershey’s typically benefit following soft-landing rate cuts, according to Bank of America’s analysis. Analysts suggest that larger companies with a solid history, not prone to splits or buyouts, like Colgate and Coca-Cola, often outperform their peers in such conditions. Additionally, businesses with floating debt could stand to gain, as a reduction in rates lowers their cost of borrowing.
The Dow surpassed the 42,000 mark on Thursday, climbing over 600 points amid a broad market rally following the Fed’s rate cut. The overall momentum saw the Dow rise by 1.5%, while the S&P 500 approached a fresh record. The Nasdaq Composite reported gains nearing 3%.
Housing stocks also experienced an uptick in response to the Federal Reserve’s recent actions. Shares of major builders such as Toll Brothers, D.R. Horton, and Lennar rose by over 1%. Despite mortgage rates dropping significantly since May, they remain above 6%, affecting sales activity. However, the Fed’s indication of additional rate cuts this year has continued to encourage the housing market, keeping new-home sales relatively strong.
Nvidia’s stock jumped over 5% as tech stocks led the market ahead of the increase in interest rates. The company’s shares traded above $119, contributing to the record highs reached by indices like the S&P 500 and Nasdaq Composite, which saw increases of up to 2.8%.
Bitcoin also soared more than 6%, trading over $63,000 per token, propelled by the overall market optimism following the Federal Reserve’s rate reduction. Despite Bitcoin’s volatility since its all-time high earlier in the year, the cryptocurrency is up more than 40% year to date.
Average 30-year fixed mortgage rates fell to 6.09%, the lowest since early February 2023. This decline was not directly linked to the Fed’s recent rate cut, illustrating ongoing fluctuations in the mortgage market.
US bank stocks experienced a boost following the Fed’s rate cut, with significant increases recorded among major banks, highlighting investor optimism regarding the easing of monetary policy.
Initial jobless claims data indicated a drop to the lowest level since May, bolstering confidence in the jobs market. The recent labor figures, showing jobless claims at 219,000, beat expectations and suggested a more stable labor market than previously thought.
Tech stocks continued to push gains across the market after the Fed’s interest rate announcement, with the Nasdaq leading the way. Both the Dow and S&P 500 reached record highs, reflecting a positive market sentiment.
Sales of existing homes fell in August as potential buyers remained cautious, despite mortgage rates dropping to their lowest level in over a year. The National Association of Realtors highlighted that existing home sales decreased by 2.5% from July, marking the slowest pace since October.
Amid this competitive landscape, Campbell Soup Company is focusing on innovation and marketing strategies to compete against private labels and larger rivals in grocery aisles. CEO Mark Clouse emphasized the importance of delivering consumer value beyond just price points.
The Dow and S&P 500 achieved intraday record highs, with the market continuing to respond positively to the Federal Reserve’s significant rate cut. The general market uplift was also reflected in the rise of commodities like gold, as the dollar softened.