U.S. stocks rose on Thursday amid growing optimism that a large interest rate cut by the Federal Reserve will lead to a “soft landing” for the U.S. economy.
The S&P 500 (^GSPC) rose about 1.5%, while the Dow Jones Industrial Average (^IXIC) rose about 1%, with both trading near record highs. The Nasdaq Composite (^IXIC) led the gains, rising 2.5%.
Stocks rose as investors awaited the U.S. Federal Reserve’s decision to start the new interest rate cycle with a 50 basis point cut. Following Wednesday’s monetary policy announcement, the indexes swung higher before closing lower.
Wall Street has absorbed Federal Reserve Chairman Jerome Powell’s message that deep cuts in a relatively strong economy will eventually stave off the threat of recession — a sign of faith, not panic about current conditions.
Bank of America now thinks the Fed will continue to cut rates by 0.75% by the end of the year, down from the 0.50% it previously forecast. By comparison, the central bank’s “dot plot” suggests policymakers are expecting a half-percentage-point rate cut.
Read more: What the Fed's rate cut means for bank accounts, CDs, loans, and credit cards
Interest-rate-sensitive growth stocks rose in premarket trading, with the tech giants that have fueled this year’s rally notching gains. Alphabet (GOOG), Microsoft (MSFT) and Meta (META) rose about 2%, while Apple (AAPL) added more than 3%. Tesla (TSLA) and Nvidia (NVDA) rose about 5%.
With the Fed's shift over, some in the market are back watching data releases as they brace for potential volatility. The Labor Department's weekly report on Initial unemployment claims Data on Thursday showed a drop to a four-month low. The figure for the week ended Sept. 19 was 219,000, while the previous week’s total was revised up by 1,000 to 231,000.
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