Wall Street soared on Thursday, with the Dow Jones Industrial Average and S&P 500 closing at all-time highs after the Federal Reserve said it would kick off an easing cycle with a half-percentage point interest rate cut and that further cuts are expected.
The Dow Jones Industrial Average rose 522.09 points, or 1.3 percent, to 42,025.19, beating its previous record of 41,622.08 set on Monday. The index rose more than 650 points to reach an intraday record of 42,160.91.
The S&P 500 rose 2.5% to close at 5,713.64, while the Nasdaq rose more than 400 points, or 2.5%.
Interest-sensitive growth stocks, which have driven much of the stock market rally this year, rose: Microsoft rose 1.8%, Tesla rose 7.4% and Apple rose 3.7%.
Semiconductor stocks such as Nvidia rose 4%, Advanced Micro Devices rose 5.7% and Broadcom rose 3.9%, while the Philadelphia SE Semiconductor Index rose 4.3%.
The Russell 2000 Index rose 2.1% along with the broader market, as a low-interest-rate environment could mean lower operating costs and higher profits for credit-dependent companies.
After issuing its superjumbo ruling on Wednesday, the Fed forecast interest rates would fall by another 50 basis points by the end of the year, releasing macroeconomic forecasts that analysts say reflect a Goldilocks scenario of stable growth, low inflation and unemployment.
“The market is reacting positively to the Fed's message yesterday. The market wanted to hear that we're not in a recession, but Chairman Powell reaffirmed that the economy is in good shape,” said Brett Kenwell, investment analyst at eToro.
“A soft landing is still in the works and that remains the default expectation. But there are still clearly concerns that the labor market is moving from a soft period to a weak period.”
Data released on the same day showed that jobless claims for the week ending September 14 came in at 219,000, below the 230,000 that economists had expected.
Traders see a 57.1% chance that the central bank will cut interest rates by 25 basis points at its November meeting. CME Group's FedWatch Tool.
BofA Global Research now expects a total of 75 basis points of cuts by the end of the year, down from its previous forecast of 50 basis points.
According to Evercore ISI data going back to 1970, the S&P 500 has posted an average gain of 14% in the six months following the first tapering of a rate-cutting cycle.
September has been a disappointing month overall for U.S. stocks, with the S&P 500 losing an average of 1.2% since 1928, but is up more than 1% so far this month.
The bank index rose 2.5%, boosted by big lenders including Citigroup Inc. and Bank of America Corp. cutting their prime rates.
Among retail investors, shares of fertility treatment benefits manager Progyny Inc. plunged 33% after a major client notified the company it had elected to exercise its option to terminate its service contract within 90 days.
