New York () – Stocks soared Thursday morning as investors cheered a surprise half-point interest rate cut by the U.S. Federal Reserve.
The Dow rose 537 points, or 1.3%. The S&P 500 gained 1.6%, breaking the 5,700-point barrier. The Nasdaq gained 2.3%.
Tech stocks soared: Nvidia shares rose 4%, Tesla 2.6%, Meta Platforms 2% and Apple 2.2%.
The Federal Reserve on Wednesday cut interest rates by 0.5 percentage points, marking its first rate cut since the start of the Covid pandemic and bringing rates to their lowest level in 23 years. The move was larger than the smaller, more conservative quarter-point cut that some investors had expected from the central bank.
A big rate cut can be a double-edged sword for the economy. Lowering interest rates should ease pressure on American businesses and citizens, which should theoretically help stem job losses. But that can also be inflationary, risking undoing some of the Federal Reserve’s hard-fought battle against runaway price increases.
The Fed’s latest decision reflects its shift in focus from controlling inflation to the other part of its dual mandate: maximizing employment. Fed Chairman Jerome Powell told reporters Wednesday that he believes the labor market and the economy are on solid footing. But he warned that the labor market is no longer as strong as it was before the Covid pandemic.
“The Fed has taken out an insurance policy against further weakening in the labor market,” wrote Ronald Temple, chief market strategist at Lazard, in a note Wednesday.
In recent months, stocks have swung between sharp declines and record highs, in part because investors fear the Federal Reserve has waited too long to cut rates and the economy could slip into recession. The Fed faced pressure to cut rates in July but stood firm.
Powell warned that investors should not expect the Fed to cut rates by half a point going forward. In its latest economic forecasts released Wednesday, Fed officials expect further rate cuts by 2024, compared with a single cut planned for this year. Central bankers expect unemployment to rise to 4.4% this year from 4.2% in August.
Gold futures, meanwhile, rose, approaching a new all-time high reached on Wednesday.
This news is in development and will be updated soon.
‘s Bryan Mena contributed to this report.
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