New York
CNN
—
Stocks jumped on Thursday as investors welcomed a half-percentage-point interest rate cut by the Federal Reserve.
The Dow Jones Industrial Average closed up 522 points, or 1.3%, setting a new record after crossing the 42,000 mark for the first time. The S&P 500 rose 1.7%, surpassing 5,700 for the first time and also closing at a new high. The Nasdaq Composite added 2.5%.
Technology stocks rose: Nvidia shares rose 4%, Tesla shares rose 7.4%, Meta Platforms shares rose 3.9%, and Apple shares rose 3.7%.
The gains continued into Friday in Asia, with Japan’s Nikkei up 2% in morning trading, South Korea’s Kospi up 1% and Hong Kong’s Hang Seng up 1.3%.
The U.S. Federal Reserve cut interest rates by half a percentage point on Wednesday, marking its first rate cut since the start of the Covid-19 pandemic, bringing rates down from a 23-year high. The move was larger than the smaller, more conservative quarter-point cut some investors had expected from the central bank.
Cutting interest rates too much could be a double-edged sword for the economy. Lowering borrowing costs would ease pressure on businesses and ordinary Americans, which would theoretically help slow job losses. But it would also stoke inflation, potentially undoing some of the Fed’s battles against rising prices.
The Fed’s latest move reflects its shift from curbing inflation to the other part of its dual mandate: maximizing jobs. Fed Chair Jerome Powell told reporters Wednesday that he believes the labor market and the economy are on solid footing. But he cautioned that the labor market is no longer as strong as it was before the Covid pandemic.
“The Fed has taken out an insurance policy against further weakness in the labor market,” Ronald Temple, chief market strategist at Lazard, wrote in a note on Wednesday.
Stock markets have been volatile in recent months between sharp declines and record highs, in part because investors feared the Federal Reserve had waited too long to cut interest rates and that the economy might slip into recession. The Fed faced pressure to cut rates in July but instead held steady.
Powell cautioned that investors shouldn’t expect a half-point pace of rate cuts going forward. Officials projected more rate cuts through 2024 in their latest economic forecasts released Wednesday, up from the single cut they previously forecast for this year. The central bankers expect the unemployment rate to rise to 4.4% this year from 4.2% in August.
As stocks settle down after the trading day, levels may change slightly.
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