Stocks on Wall Street soared Thursday, a day after the Federal Reserve lowered its reference rate up 0.50 percentage points, with investors cheering the central bank’s move to counter a slowdown in US economic growth.
The Dow Jones Industrial Average jumped 479 points, or 1.1%, as of 10:02 a.m. ET to 41,982. The S&P 500 climbed 87 points, or 1.6%, while the tech-heavy Nasdaq jumped 2.3%.
“Stocks explode higher as markets absorb Fed’s outsized rate cut,” Adam Crisafulli at Vital Knowledge said in a note to investors.
Lower interest rates help financial markets in two major ways. They ease the brakes on the economy by making it cheaper for American households and businesses to borrow money, which can accelerate spending and investment. They also raise the prices of riskier assets such as stocks, gold and cryptocurrencies.
The half-point move signals that the Fed is acting aggressively to prevent the US economy from stalling, given that historically most interest rate cuts have been at 0.25 percentage points. The interest rate cut will provide some relief to US consumers struggling with high interest rates affecting credit cards, mortgages and car loans.
Stocks rose modestly immediately after the Fed announced it was cutting interest rates for the first time since March 2020. But with a day to digest the move, which included new data from the central bank forecasting solid economic growth in 2025, investors appeared encouraged in morning trade .
“I don’t see anything in the economy right now that suggests the likelihood of a recession is elevated — you see growth at a solid pace, you see inflation coming down and a labor market that’s still at very solid levels,” Fed Chairman Jerome Powell said in a press conference on Wednesday to discuss the rate cut.
— The Associated Press contributed to this report.