Traders work on the floor at the New York Stock Exchange.
Brendan McDermid | Reuters
Stocks jumped Thursday, with the Dow Jones Industrial Average and S&P 500 rising to new all-time highs, as traders cheered the Federal Reserve’s Wednesday decision to lower interest rates by a half percentage point.
The Dow Jones Industrial Average advanced 555 points, or 1.3%, topping 42,000 for the first time. The S&P 500 rose 1.9%, marking its first break above 5,700. The Nasdaq Composite surged 2.8%.
Traders got some validation that the Fed was engineering a soft landing for the economy on Thursday as weekly jobless claims fell by 12,000 to 219,000, which was far below estimates.
Tech stocks rallied as the rate cut spurred investors to return to a risk-on mood. Nvidia and AMD shares popped more than 5% and 7%, respectively. Micron Technology traded more than 3% higher. Other big tech stocks such as Meta and Alphabet advanced 3.3% and 2.2%, respectively.
Stocks leveraged to lower rates spurring the economy also jumped Thursday morning. Financial giant JPMorgan Chase rose 1.8%. Industrial stock Caterpillar and Home Depot gained 5.3% and 1.7%, respectively.
The Fed slashed its overnight lending rate to a range of 4.75% to 5% from 5.25% to 5.5% on Wednesday, which came as a surprise to some investors who criticized the size of this initial cut. This is the first rate reduction delivered by the Fed in four years.
“It’s not surprising to see the markets bounce pretty nicely today. We were getting a little long in the tooth with some of the earnings growth estimates,” said Timothy Chubb, chief investment officer at Girard Advisory Services.
“They continued to move higher the last couple of weeks, but broadly speaking, there’s certainly a lot of companies within the market that are really going to benefit from having looser monetary policy conditions; in particular, small caps,” Chubb added.