On Thursday, U.S. equity indexes experienced a notable rise in the midday session, buoyed by the performance of high-growth sectors such as technology and communication services. This uptick came following a pivotal decision by the Federal Reserve, marking the first significant easing of monetary policy in four years.
The broader S&P 500 index surged 1.8%, settling at 5,721.3 points, while the tech-heavy Nasdaq Composite saw an impressive 2.8% increase, reaching 18,060.8. Meanwhile, the Dow Jones Industrial Average climbed 1.3%, finishing the day at 42,051.4. These movements propelled the S&P 500 and the Dow to new intraday record highs of 5,725.16 and 42,105.01, respectively.
Among the mega-cap stocks, several technology titans including Tesla, Nvidia, Meta Platforms, Apple, Alphabet, and Microsoft were the standout performers, each seeing gains of at least 1.8% during the intraday trade. The consumer discretionary sector benefited from this bullish trend, contrasting with the utilities sector, which led the decliners.
The Russell 2000 index, which represents smaller companies, also thrived, increasing by 2.1% to reach 2,252.69. Market analysts predict that the Federal Reserve’s recent actions will contribute to a more favorable financial environment for smaller firms as well. In a significant shift, the Federal Open Market Committee (FOMC) reduced the benchmark federal funds rate to a range of 4.75% to 5%—a move not seen since March 2020.
This adjustment surprised some experts, as predictions had generally coalesced around a 25-point cut. For over a year, the central bank had refrained from making moves in anticipation of the impact of its previous tight monetary policy. Morgan Stanley analysts remarked on the changing economic landscape, stating, "Risks to inflation have come down while risks to the labor market have risen," emphasizing Fed Chair Jerome Powell’s declaration that a larger initial adjustment was essential to convey the Fed's commitment to maintaining a proactive stance in addressing inflation.
The FOMC provided an updated economic forecast where members adjusted the key rate expectation to 4.4% for this year, down from an earlier prediction of 5.1% made in June. They projected a gradual decline over the next year, estimating an average rate of 3.4% in 2024, as compared to the previously anticipated 4.1%.
Simultaneously, there was an upward revision of unemployment rate expectations to 4.4% for the current year, an increase from June's forecast of 4%. The outlook for inflation and economic growth for 2024 was also toned down, while the projections for expansion remained steady for the upcoming year. Derek Holt, head of capital markets economics at Scotiabank, noted, "The strong signal from the committee is probably that they are more concerned about the risks facing the outlook for the U.S.
economy and seeking to counter them with more easing." The newly revised dot-plot revealed that most FOMC members foresee an additional 50 basis points of cuts in future meetings this fiscal year. Reflecting favorable market conditions, the CBOE Volatility Index, known as the fear gauge, saw a notable drop of 8%, indicating diminishing demand for protective financial strategies in a bullish equity atmosphere.
On the broader treasury markets, yields for most U.S. Treasuries saw an uptick, with the 10-year yield rising by 5.6 basis points, settling at 3.74%. In terms of economic data released, initial jobless claims in the U.S. fell to 219,000 for the week ending September 14, a decline from an upwardly revised 231,000 the previous week.
This figure also nestled below the anticipated 230,000 as per a survey conducted by Bloomberg. Additionally, the four-week moving average dipped by 3,500, landing at 227,500. The monthly manufacturing index from the Philadelphia Federal Reserve rebounded to 1.7 in September after a decline to -7.0 in August, surpassing forecasts that anticipated a stable reading.
A similar bullish expansion was reported in the Empire State index earlier in the week. In company-specific news, Darden Restaurants reaffirmed its full-year guidance on Thursday, despite reporting fiscal first-quarter results that fell short of expectations amid decreased patronage in July. However, the stock price rose by an impressive 8.9% intraday, securing the position of the leading gainer on the S&P 500.
Additionally, West Texas Intermediate crude oil futures saw an advance of 1.8%, trading at $72.18 per barrel. In precious metals, gold prices increased by 0.6% to reach $2,614.60 per ounce, while silver recordings performed even better, climbing 2.3% to settle at $31.40 per ounce..