Equities surge on Thursday following the Federal Reserve's significant interest rate reduction.
Tech stocks soared: Nvidia shares jumped 4%, Tesla shares increased by 2.6%, Meta Platforms shares went up 2% and Apple shares climbed 2.2%.
The tech sector celebrated: S&P 500 rose 1.6%, breaking the 5,700 barrier. The Dow increased by 537 points, or 1.3%. The Nasdaq Composite added 2.3%.
Fed's bold move: On Wednesday, the Federal Reserve reduced its interest rates by half a point. This was the first rate decrease since the start of the Covid-19 pandemic and lowered rates from a 23-year peak. The size of the reduction was bigger than the anticipated quarter-point cut by some investors.
Two sides to a big cut: While reducing rates can alleviate pressure on companies and individuals, potentially slowing job losses, it can also foster inflation, potentially undoing some progress against unwarranted price surges.
Fed's focus shift: The Federal Reserve's recent action signifies a shift in focus from controlling inflation to promoting employment, as per its dual mandate. Jerome Powell, the Fed Chair, stated that the job market and economy are in a stable condition. However, he warned that the labor market isn't as strong as it was prior to the Covid-19 pandemic.
Insurance policy against weakening labor: Ronald Temple, chief market strategist at Lazard, expressed that the Fed's move was an "insurance policy against further labor market weakening."
Market turbulence: Stocks have experienced volatility in recent months, oscillating between steep falls and record highs, due in part to concerns that the Fed delayed rate reduction and the potential for an economic downturn. Despite pressure in July, the Fed held off from cutting rates.
Powell's warning: Powell warned investors that they should not expect the half-point reduction to be the norm for future rate reductions. Officials projected further rate cuts for 2024 in their recent economic outlook, up from the single cut predicted earlier this year. Central bankers expect unemployment to rise to 4.4% this year from August's 4.2% rate.
Upward trend for gold: Elsewhere, gold futures climbed, edging close to the record high achieved on Wednesday.
This is an evolving story and will be updated.
CNN's Bryan Mena contributed to this report.
Businesses and investors may see improved financial conditions due to the Federal Reserve's rate decrease, potentially boosting spending and investment in the tech sector. The move could also encourage more venture capital investing in promising tech startups.
