US stocks soared on Thursday on growing optimism that the Federal Reserve’s sharp rate cut will provide a “soft landing” for the US economy.
The S&P 500 (^GSPC) rose about 1.7%, while the Dow Jones Industrial Average (^IXIC) rose more than 500 points, with both trading near closing record highs. The tech-heavy Nasdaq Composite (^IXIC) led the gains, rising 2.2%.
Stocks are rising as investors weigh the Fed’s decision to start the new rate cycle with a 50 basis point cut. Gauges swung around before closing lower after Wednesday’s policy announcement.
Wall Street has taken on board Chairman Jerome Powell’s message that deep spending cuts in a relatively strong economy will eventually avert the risk of a recession. That’s a sign of confidence, not panic about current conditions.
Bank of America now believes the Fed will cut rates by 0.75% by the end of the year, rather than the 0.50% it previously forecast. For comparison, the central bank’s own “dot plot” suggests policymakers are expecting a cut of half a percentage point.
Read more: What the Fed’s Rate Cut Means for Bank Accounts, CDs, Loans and Credit Cards
Rate-sensitive growth stocks rose in premarket trading, with Big Tech mega-caps that fueled this year’s rally posting gains. Alphabet (GOOG), Microsoft (MSFT) and Meta (META) all rose about 2%, while Apple (AAPL) added more than 3%. Tesla (TSLA) and Nvidia (NVDA) rose about 4%.
Now that the Fed has made its turn, some in the market are once again eyeing the data release as they brace for potential volatility. A weekly report from the Labor Department on initial jobless claims on Thursday morning showed a drop to a four-month low. The figure for the week ending Sept. 19 came in at 219,000, while the previous week’s total was revised up 1,000 to 231,000.
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