New York (CNN) – Stocks soared Thursday morning as investors celebrated the U.S. Federal Reserve’s surprising half-point interest rate cut.
The Dow rose 537 points, or 1.3%. The S&P 500 gained 1.6%, surpassing the 5,700 point barrier. The Nasdaq added 2.3%.
Tech stocks soared: Nvidia shares rose 4%, Tesla shares rose 2.6%, Meta Platforms shares rose 2% and Apple shares rose 2.2%.
The Federal Reserve on Wednesday cut the interest rate by 0.5 percentage points, marking its first rate cut since the start of the Covid pandemic and taking 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 relieve pressure on American businesses and citizens, which should theoretically help curb job losses. But that can also be inflationary, running the risk of undoing part of the Federal Reserve’s uphill 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 Chair 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 of the labor market,” Ronald Temple, chief market strategist at Lazard, wrote in a Wednesday note.
In recent months, stocks have swung between sharp declines and record highs, in part because investors fear that the Federal Reserve has waited too long to lower rates and that the economy could fall into recession. The Federal Reserve faced pressure to cut rates in July but held firm.
Powell cautioned that investors should not expect the pace at which the Federal Reserve cuts rates in the future to be half a point. In their latest economic forecasts released Wednesday, Federal Reserve officials forecast more rate cuts in 2024, down from the only cut planned for this year. Central bankers expect unemployment to rise to 4.4% this year, from a rate of 4.2% in August.
Elsewhere, gold futures rose, approaching a new all-time high reached on Wednesday.
This news is in development and will be updated soon.
CNN’s Bryan Mena contributed to this report.
