Stocks soared on Thursday, with the Dow Jones Industrial Average and S&P 500 reaching new all-time highs, following the Federal Reserve’s decision to reduce interest rates by half a percentage point on Wednesday.
The Dow climbed 522.09 points, or 1.26%, closing at 42,025.19, marking its first close above 42,000. The S&P 500 also experienced a notable gain of 1.7%, finishing at 5,713.64, surpassing the 5,700 mark for the first time. Meanwhile, the Nasdaq Composite surged 2.51%, closing at 18,013.98.
On Thursday, traders received confirmation that the Fed may be successfully guiding the economy towards a soft landing, as weekly jobless claims dropped by 12,000 to 219,000, significantly below projections.
Tech stocks benefited from the rate cut, prompting investors to adopt a more risk-friendly approach. Shares of Nvidia rose about 4%, while AMD surged nearly 6%. Micron Technology saw an increase of 2.2%. Other major tech companies, including Meta Platforms and Alphabet, increased by 3.9% and 1.5%, respectively.
Stocks that typically benefit from lower interest rates also saw gains. Financial behemoth JPMorgan Chase was up 1.4%, while industrial firms Caterpillar and Home Depot advanced by 5.1% and 1.7%, respectively.
The Fed reduced its overnight lending rate to a range of 4.75% to 5.00%, down from 5.25% to 5.50%, surprising some investors who had questioned the magnitude of the cut. This marks the Fed’s first rate reduction in four years.
Timothy Chubb, chief investment officer at Girard Advisory Services, noted, “It’s not surprising to see the markets bounce pretty nicely today. We were getting a little long in the tooth with some of the earnings growth estimates. Many companies within the market are likely to benefit from looser monetary policy conditions, especially small caps.”