Indexes Hit Record Highs and Tech Surges Following Fed Rate Cut

On Thursday, major stock indexes soared to record highs, following the Federal Reserve’s significant rate cut announcement the previous day. The S&P 500 and the Dow Jones Industrial Average both achieved all-time peaks, while the Nasdaq increased by 2.5%.

The stock market rally was largely driven by technology stocks, with prominent companies such as Nvidia, Broadcom, ASML, and Meta seeing their shares rise approximately 4%. According to Wedbush analyst Dan Ives, this surge in tech shares can be attributed directly to the Fed’s decision.

Ives remarked that the rate cut was the “missing piece in the puzzle,” suggesting that it signals a renewed optimism for tech growth investments leading into the end of the year and into 2025. This enthusiasm was palpable among investors who felt that the central bank had expertly navigated the economic landscape to ensure a soft landing for the U.S. economy.

On Wednesday, the Federal Reserve cut interest rates for the first time in four years, reducing its benchmark rate by 50 basis points. Following this announcement, major stock indexes initially spiked but then moderated, ultimately closing mostly flat. Nevertheless, Thursday’s trading session demonstrated a strong rebound.

Investor sentiment has shifted to a more hopeful outlook, with many believing the Fed has effectively managed to balance the ongoing battle against inflation while safeguarding the job market. The Fed’s dot plot analysis suggests that further rate cuts are likely, projecting another 50 basis points cut this year and an additional 100 basis points next year. Current market forecasts indicate expectations for a total of 75 basis points decreases for the remainder of this year, with potential cuts ranging between 100 and 150 basis points in the following year.

During his remarks following the Federal Open Market Committee (FOMC) meeting, Chair Jerome Powell emphasized the strength of the labor market. He stated, “The labor market is actually in solid condition. And our intention with our policy move today is to keep it there,” reinforcing the Fed’s commitment to maintaining a healthy employment landscape.

Supporting Powell’s assertion, the latest weekly jobless claims data showed a decrease of 12,000, bringing claims down to 219,000. This marked the most substantial decline in claims in over a month, reinforcing the narrative of a robust labor market.

As for the state of U.S. indexes at the close of business on Thursday, the positive momentum continued to define market performance.

Other notable developments included the persistence of rising Treasury yields despite the Fed’s aggressive action on interest rates. Analysts have pointed to this as a critical indicator to watch, as increasing yields can have various implications for the economy.

In terms of other market movements, shares of Trump Media fell due to a lockup expiration that now allows the former president to sell his shares. Concerns were raised in the financial community regarding the speed of the Fed’s recent rate cuts, with some experts warning that such rapid moves might risk reigniting inflation in the future.

In commodities and cryptocurrencies, oil futures experienced a downward trend. WTI crude increased by 1.6%, reaching $72.02 per barrel, while Brent crude saw a rise of 1.5%, settling at $74.77 per barrel. Gold prices grew by 1.7%, now priced at $2,585 per ounce, while the 10-year Treasury yield rose by three basis points to reach 3.719%. In the cryptocurrency market, Bitcoin surged by 5%, climbing to $63,209.

The compelling events from the Fed’s decision and the resulting market reactions highlight a dynamic economic landscape, where investor sentiment is influenced heavily by central bank policies and employment statistics.

Source: Business Insider