Tech-Led Rally: Wall Street Gains as Fed Easing Cycle Begins
After the Federal Reserve initiated its easing cycle with a half-percentage point reduction and predicted additional reductions, Wall Street rallied on Thursday, with the S&P 500 reaching another intraday record high.
Growth equities that are sensitive to interest rates, which have been the driving force behind this year’s rally, experienced an increase. Microsoft (NASDAQ:MSFT) increased by 2%, Tesla (O:TSLA) increased by 4.2%, and Apple (NASDAQ:AAPL) advanced by 2.6%.
Nvidia (NASDAQ:NVDA), Advanced Micro Devices (NASDAQ:AMD), and Broadcom (NASDAQ:AVGO) were among the semiconductor firms that experienced a 4.7% increase, with the Philadelphia SE Semiconductor Index seeing a 3.6% increase.
The Russell 2000 index also increased by 1.7% in tandem with the broader market, as a lower interest rate environment could result in increased profits and reduced operating costs for credit-dependent companies.
The Dow Jones Industrial Average increased by 391.24 points, or 0.94%, to 41,894.34 at 09:46 a.m. The S&P 500 gained 72.37 points, or 1.29%, to 5,690.63, and the Nasdaq Composite gained 377.68 points, or 2.15%, to 17,955.01.
Nine of the 11 sectors of the S&P 500 experienced growth, with technology equities leading the way with a 2.8% increase. Conversely, utilities were the most lagging sector.
Following its large-scale decision on Wednesday, the Federal Reserve anticipated that rates would decrease by an additional 50 basis points by the end of the year. Additionally, the Fed disclosed macroeconomic projections that analysts believe correspond to a “goldilocks” scenario, in which inflation and unemployment remain low while growth remains consistent.
According to the data published on the day, the number of unemployment claims for the week ending September 14 was 219,000, which was lower than the 230,000 estimate of economists.
Ross Mayfield, an investment strategist at Baird, stated, “The Fed’s rate cut has elicited a delayed response… the claims were low, which will only serve to reinforce the notion that a soft landing is imminent.”
“The guidance for plenty more cuts by the end of 2025 should open up (rate-sensitive) sectors to reengage and expand.”
Traders currently anticipate that the central bank will reduce interest rates by 25 basis points at its November meeting, according to the FedWatch instrument of the CME Group (NASDAQ:CME). This probability is 63.1%.
According to BofA Global Research, the total number of rate decreases by the end of the year is expected to be 75 basis points, up from the previous forecast of 50 basis points.
The market’s response to the decision was subdued, with all three indexes closing marginally lower in the previous session.
Nevertheless, Evercore ISI’s data, which spans back to 1970, indicates that the S&P 500 has experienced an average 14% increase in the six months succeeding the initial rate reduction of a rate-cutting cycle.
The S&P 500 has experienced an average loss of 1.2% since 1928, and September has historically been a disappointing month for U.S. equities.
In response to the reduction of their respective prime rates, Bank of America and Wells Fargo both experienced a rise of over 1%.
Additionally, Citigroup experienced a 1.9% increase, which resulted in a 0.8% increase in the broader banks index.
After a substantial client informed the company that it had elected to exercise a 90-day option to terminate its services agreement, Progyny (NASDAQ:PGNY), a fertility benefits management firm, experienced a 33% decline among individual movers.
On the NYSE, the ratio of advancing issues to decliners was 5.27 to 1, while on the Nasdaq, it was 4.71 to 1.
The Nasdaq Composite recorded 100 new highs and 24 new lows, while the S&P 500 posted 47 new 52-week highs and no new lows.
