Stocks jumped Thursday as investors cheered the Federal Reserve’s eye-popping half-point interest rate cut.
The Dow rose 633 points, or 1.5%, on Thursday afternoon to pass 42,000. The S&P 500 gained 2%, topping the 5,700 level for the first time. The Nasdaq Composite added 2.9%.
Tech stocks surged: Nvidia (NVDA) shares popped 5.3%, Tesla (TSLA) shares gained 7.1%, Meta Platforms (META) shares rose 3.5% and Apple (AAPL) shares climbed 3.8%.
A large rate cut can be a double-edged sword for the economy. Lowering borrowing rates should take pressure off companies and everyday Americans, which should theoretically help slow down job losses. But that can also be inflationary, running the risk of undoing some of the Fed’s hard-fought battle against wayward price hikes.
The Fed’s latest decision reflects its shift from tamping down inflation to the other part of its dual mandate: maximizing employment. Fed Chair Jerome Powell told reporters on Wednesday that he believes the job market and economy are both on solid footing. But he cautioned that the labour market is no longer as strong as it was before the Covid pandemic.
“The Fed took out an insurance policy against further labour market weakening,” wrote Ronald Temple, chief market strategist at Lazard, in a Wednesday note.
Stocks have whipsawed in recent months between steep drops and notching record highs, in part as investors worried that the Fed waited too long to cut rates and that the economy could enter a downturn. The Fed faced pressure to cut rates in July but held steady instead.
Powell warned that investors shouldn’t expect half a point to be the pace at which the Fed cuts rates going forward. Officials pencilled in more rate cuts for 2024 in their latest economic forecasts released Wednesday, up from the single cut they previously forecasted for this year. Central bankers expect unemployment to rise to 4.4% this year from August’s 4.2% rate.
Elsewhere, gold futures rose, inching closer to a fresh record high reached Wednesday.
Source: https://edition.cnn.com/2024/09/19/investing/stocks-fed-rate-cut/index.html
