US stocks surged on Thursday amid growing optimism that the Federal Reserve’s big interest rate cuts will lead to a “soft landing” for the US economy.
The S&P 500 (^GSPC) rose about 1.5% and the Dow Jones Industrial Average (^IXIC) rose more than 1%, both trading near all-time highs. The tech-heavy Nasdaq Composite Index (^IXIC) led the gains, rising 2.7%.
Stocks are rising as investors watch the Fed’s decision to kick off a new interest rate cycle with a 50 basis point cut. Indicators were volatile after Wednesday’s policy announcement before closing lower.
Wall Street has taken Fed Chairman Jerome Powell’s message that big rate cuts in a relatively strong economy will ultimately stave off the risks of a recession as a sign of faith, not panic, in the status quo.
Bank of America now expects the Fed to cut rates by 0.75 percentage points by the end of the year, down from the 0.50% it had previously forecast. By comparison, the central bank’s “dot plot” shows policymakers expect a 0.5 percentage point cut.
Read more: How the Federal Reserve’s rate cut will affect your bank accounts, CDs, loans and credit cards
Interest-sensitive growth stocks rose in premarket trading, lifting shares of the big technology companies that have led this year’s gains. Alphabet (GOOG), Microsoft (MSFT) and Meta (META) all rose, while Apple (AAPL) rose more than 3%. Tesla (TSLA) and Nvidia (NVDA) also surged.
With the Fed’s shift over, some in the market are once again monitoring data releases to prepare for potential volatility. Weekly jobless claims reported by the Labor Department on Thursday morning fell to the lowest level in four months. The figure for the week ending Sept. 19 was 219,000, after the previous week’s figure was revised up by 1,000 to 231,000.
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