Stocks soared on Thursday, reaching new records as the Dow Jones Industrial Average and S&P 500 celebrated the Federal Reserve’s recent decision to cut interest rates by half a percentage point.
The Dow climbed 522.09 points, or 1.26%, closing at 42,025.19, its first close above 42,000. The S&P 500 increased by 1.7% to finish at 5,713.64, surpassing the 5,700 mark for the first time. The Nasdaq Composite surged 2.51%, ending the day at 18,013.98.
Investors were buoyed by the news that weekly jobless claims fell by 12,000, totaling 219,000, a figure significantly lower than anticipated, suggesting the Fed’s strategy might be leading to a smoother economic transition.
Technology stocks benefited from the rate reduction, fostering a more risk-taking approach among investors. Shares of Nvidia and AMD rose approximately 4% and nearly 6%, respectively. Micron Technology gained 2.2%, while other major tech firms like Meta Platforms and Alphabet saw increases of 3.9% and 1.5%, respectively.
Also, stocks linked to economic growth spurred by lower rates experienced notable gains. Financial heavyweight JPMorgan Chase increased by 1.4%, while industrial company Caterpillar and Home Depot saw their stocks rise by 5.1% and 1.7%, respectively.
On Wednesday, the Fed lowered its overnight lending rate to a range of 4.75% to 5.00%, down from 5.25% to 5.50%. This unexpected move marked the first rate cut from the Fed in four years and surprised some investors who questioned the significance of the reduction.
Timothy Chubb, chief investment officer at Girard Advisory Services, commented on the market’s 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 an environment of looser monetary policy, particularly small-cap stocks.