The U.S. stock market surged on Thursday, September 19, 2024, as investors cheered the Federal Reserve’s decision to cut interest rates by 50 basis points. This move, which marks the first rate cut in over four years, is part of the central bank’s strategy to ease economic concerns and prevent a recession. The S&P 500 jumped 1.7%, while the Dow Jones Industrial Average climbed more than 500 points, closing at record highs. The Nasdaq Composite led the rally, rising 2.2%, buoyed by tech giants such as Apple, Microsoft, and Tesla.
The rate cut followed a period of uncertainty, with many investors unsure whether the Fed would opt for a 25 or 50 basis point reduction. The larger-than-expected cut is seen as a proactive measure by the central bank to stave off potential economic slowdowns, despite recent signs of a softening labor market. Jerome Powell, the Fed Chairman, emphasized that this rate adjustment was a “recalibration” rather than a response to economic weakness. Powell reassured investors that the U.S. economy remains strong, but acknowledged the growing risks to the labor market, as reflected in recent data
This optimism around the Fed’s intervention has caused rate-sensitive growth stocks to rally, particularly in the tech sector. Big names like Alphabet, Nvidia, and Meta saw significant gains, as lower borrowing costs are expected to benefit these companies. Investors are now focused on future economic data releases to assess whether this rate cut will lead to the coveted “soft landing”—a scenario where the Fed can bring down inflation without causing a recession
Bank of America, along with other analysts, has revised its forecast, now predicting that the Fed may reduce rates by an additional 0.75% by the end of the year. This contrasts with the Fed’s own projections, which suggest a more cautious approach. Meanwhile, market participants are closely watching labor market reports, such as the recent initial jobless claims, which hit a four-month low, providing some reassurance to those wary of economic turbulence.
Dow surges 500 points as Fed-fueled stocks set sights on records
