new york
CNN
—
Stocks surged Thursday morning as investors welcomed the Federal Reserve's surprise half-point interest rate cut.
The Dow rose 537 points, or 1.3%, the S&P 500 rose 1.6%, surpassing the 5,700 level, and the Nasdaq Composite rose 2.3%.
Tech stocks surged: Nvidia shares rose 4%, Tesla shares rose 2.6%, Meta Platforms shares rose 2% and Apple shares rose 2.2%.
The Federal Reserve cut interest rates by half a percentage point on Wednesday, its first cut since the start of the coronavirus pandemic and bringing them down from a 23-year high. The cut was larger than the smaller, more conservative 25-point reduction some investors had expected from the central bank.
A big rate cut could be a double-edged sword for the economy: Lower borrowing costs would ease the burden on businesses and ordinary Americans, theoretically helping to slow the decline in unemployment. But it could also raise inflation, risking undoing part of the fight against reckless price increases the Fed has fought so hard to achieve.
The Fed's latest decision reflects a shift from fighting inflation to maximizing employment, another part of the central bank's dual mandate. Fed Chairman Jerome Powell told reporters on Wednesday that he believes the job market and economy are both strong, but he also warned that the labor market is no longer as strong as it was before the pandemic.
“The Fed has insured against further weakness in the labor market,” Ronald Temple, chief market strategist at Lazard, wrote in a note Wednesday.
Stocks have been oscillating between sharp declines and record highs in recent months, in part because investors worried the Fed had waited too long to cut interest rates, which could lead to a downturn in the economy. The Fed faced pressure to cut rates in July but instead left them on hold.
Powell warned that investors shouldn't expect the Fed to cut rates at a half-percentage-point clip going forward. In their latest economic forecasts released Wednesday, officials projected one rate cut this year, with another cut planned for 2024. The central bank now expects the unemployment rate to rise to 4.4% this year, from 4.2% in August.
Meanwhile, gold futures rose, approaching fresh record highs hit on Wednesday.
This is a developing story and will be updated.
