In a significant move that has sent US equity indexes soaring, market activity on Thursday reflected a robust performance in high-growth sectors, particularly technology and communication services. This notable increase follows the Federal Reserve's recent decision to ease monetary policy, marking the first such adjustment in four years.
The S&P 500 index experienced a substantial jump of 1.8%, settling at 5,719.5 points. Similarly, the Nasdaq Composite surged by 2.8%, reaching 18,060.5 points, while the Dow Jones Industrial Average also enjoyed a rise, climbing 1.3% to 42,030.8 points. Within the mega-cap category, several tech giants, including Tesla (TSLA), Nvidia (NVDA), Meta Platforms (META), Apple (AAPL), Alphabet (GOOGL), and Microsoft (MSFT), emerged as standout performers, each posting gains of at least 2% during the trading day. Among the sectors, consumer discretionary stocks showed notable gains, signaling positive investor sentiment, whereas utilities found themselves on the decline, leading the trio of underperformers.
The Federal Open Market Committee (FOMC), during their meeting on Wednesday, made a pivotal decision to lower the benchmark Fed funds rate to a range of 4.75% to 5%. This rate cut is particularly significant as it represents the first change since March 2020, diverging from the Bloomberg-compiled consensus, which had anticipated a more modest 25-point reduction.
The Fed, having remained inactive for 13 months, seems to be responding to evolving economic conditions as they seek to adjust their monetary policy accordingly. Analysts from Morgan Stanley remarked, 'Risks to inflation have come down while risks to the labor market have risen.' They emphasized that to demonstrate their commitment to keeping pace with economic circumstances and their confidence in the progress against inflation, Fed Chair Jerome Powell deemed a considerable first move necessary. In the latest projections shared by FOMC members, the anticipated key rate for the rest of the year has been adjusted to 4.4%, down from the previous expectation of 5.1% mentioned in June.
Analysts project that the trajectory of rate cuts will lead to an average rate of 3.4% next year, a decrease from the 4.1% forecasted in June. Additionally, unemployment rate expectations have been revised upward to 4.4% for this year, compared to the earlier estimate of 4%, while projections for inflation and economic growth in 2024 have been decreased.
Nonetheless, views on economic expansion for the upcoming year have remained unchanged. Treasury yields also witnessed an uptick, with the 10-year yield rising by 5.3 basis points to settle at 3.74%. In the realm of economic data released on Thursday, initial jobless claims in the US saw a decline to 219,000 for the week ending September 14, a drop from an upwardly revised figure of 231,000, and below the anticipated 230,000 based on Bloomberg surveys.
The four-week moving average also indicated a decrease, falling by 3,500 to 227,500. From a corporate standpoint, Darden Restaurants (DRI) provided an update on its full-year outlook during Thursday’s session, even while reporting fiscal first-quarter results that fell short of expectations amidst a slowdown in customer traffic during July.
Notably, Darden shares surged by 8.5% intraday, earning it the title of top gainer on the S&P 500 index. Moreover, West Texas Intermediate crude oil futures made strides, climbing 2.1% to $72.42 per barrel..