US stocks soared, with the Dow Jones Industrial Average (^DJI) closing above the 42,000 level for the first time amid growing optimism that the Federal Reserve’s jumbo interest rate cut will deliver a “soft landing” for the US economy.
The S&P 500 (^GSPC) climbed roughly 1.7%, while the Dow rose more than 1.2%, with both indexes trading at record highs. The tech-heavy Nasdaq Composite (^IXIC) led the gains, up roughly 2.5%.
Stocks rallied as investors took a closer look at the Fed’s decision to kick-start its new rate cycle with a 50 basis point cut. After Wednesday’s policy announcement, the gauges swayed before closing lower.
Wall Street has absorbed Fed Chair Jerome Powell’s message that a deep cut in a relatively strong economy will ultimately fend off the risk of recession — and is a sign of faith, not panic about current conditions.
Bank of America now believes the Fed will go on to cut rates by 0.75% by the end of the year, versus the 0.50% it previously forecast. By comparison, the central bank’s own “dot plot” indicates policymakers expect a half-percentage-point reduction.
Rate-sensitive growth stocks climbed, with Big Tech megacaps that fueled this year’s rally making gains. Alphabet (GOOG), Microsoft (MSFT), and Meta (META) all rose, while Apple (AAPL) added over 3%. Tesla (TSLA) and Nvidia (NVDA) also surged.
With the Fed pivot done, some in the market have returned to watching data releases as they brace for potential volatility. A weekly Labor Department report on initial jobless claims on Thursday morning showed a fall to the lowest level in four months. The figure for the week ended Sept. 19 came in at 219,000, while the prior week’s total was revised 1,000 higher to 231,000.
