Tech stocks rally and jobless claims fall as investors react to the Federal Reserve’s rate reduction
Stocks surged Thursday as the Dow Jones Industrial Average and S&P 500 reached new all-time highs.
This followed the Federal Reserve’s decision on Wednesday to lower interest rates by half a percentage point, according to CNBC.
The 30-stock Dow Jones index gained 522.09 points, or 1.26 percent, closing at 42,025.19, its first close above the 42,000 mark. The S&P 500 increased by 1.7 percent, ending at 5,713.64, surpassing 5,700 for the first time. The Nasdaq Composite also rose sharply by 2.51 percent to close at 18,013.98.
Traders interpreted the Fed’s rate cut as a sign that the central bank was facilitating a soft landing for the economy. Weekly jobless claims fell by 12,000 to 219,000, far below expectations, providing further optimism.
Technology stocks rallied in response to the rate cut, with Nvidia and AMD shares climbing approximately 4 percent and nearly 6 percent, respectively. Micron Technology also gained 2.2 percent, while Meta Platforms and Alphabet saw gains of 3.9 percent and 1.5 percent, respectively.
Other stocks, particularly those sensitive to lower rates and economic stimulation, also jumped on Thursday. JPMorgan Chase rose 1.4 percent, while industrial stock Caterpillar surged 5.1 percent and Home Depot increased by 1.7 percent.
On Wednesday, the Federal Reserve reduced its overnight lending rate to a range of 4.75 percent to 5.00 percent from 5.25 percent to 5.50 percent. This move marked the first rate cut in four years, catching some investors off guard due to the size of the initial cut.
“It’s not surprising to see the markets bounce pretty nicely today,” said Timothy Chubb, chief investment officer at Girard Advisory Services.
He noted that while earnings growth estimates had been trending higher, companies, particularly small caps, would benefit from a more accommodating monetary policy environment.
