Stocks experienced a significant boost on Thursday, with the Dow Jones Industrial Average and the S&P 500 reaching new all-time highs. This rally was fueled by traders’ positive reactions to the Federal Reserve’s decision on Wednesday to lower interest rates by a half percentage point.
The Dow increased by 522.09 points, or 1.26%, closing at 42,025.19, marking its first finish above the 42,000 mark. The S&P 500 rose 1.7%, finishing at 5,713.64, also achieving a new milestone above 5,700. The Nasdaq Composite saw a notable surge of 2.51%, ending at 18,013.98.
Traders received encouraging news about the economy on Thursday as weekly jobless claims dropped by 12,000 to 219,000, significantly below predictions, suggesting the Fed may be successfully guiding the economy toward a soft landing.
Technology stocks experienced significant gains as the rate cuts prompted a renewed appetite for risk among investors. Shares of Nvidia and AMD rose approximately 4% and nearly 6%, respectively, while Micron Technology increased by 2.2%. Major tech companies such as Meta Platforms and Alphabet also posted gains of 3.9% and 1.5%, respectively.
Stocks that tend to benefit from lower interest rates saw strong performances as well. Financial titan JPMorgan Chase rose by 1.4%, while industrial giants Caterpillar and Home Depot enjoyed gains of 5.1% and 1.7%, respectively.
The Federal Reserve reduced its overnight lending rate from a range of 5.25% to 5.50% to a new range of 4.75% to 5.00%, a move that surprised some investors who had concerns about the magnitude of such a cut. This marked the Fed’s first reduction in rates in four years.
Timothy Chubb, chief investment officer at Girard Advisory Services, remarked on the market’s positive response, stating, “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.” He noted that many companies would benefit from looser monetary conditions, particularly small-cap stocks.