The Standard & Poor’s 500 index closed at a record high late Thursday, a day after the Federal Reserve cut interest rates by 50 basis points and signaled more cuts this year.
Heavyweight stocks made fresh gains after rising for most of the year, with Tesla, Apple and Meta Platforms all rising sharply.
Shares of artificial intelligence giant Nvidia rose, helping lift the BHLX semiconductor index.
Better-than-expected jobless claims data helped boost risk appetite globally.
The Federal Reserve announced on Wednesday that it had cut interest rates at the higher end of expectations, saying it had greater confidence that inflation was under control.
According to the data, at the close yesterday evening, the Standard & Poor’s 500 index rose by 1.70% to 5,713.64 points at the close, the Nasdaq Composite index rose by 2.51% to 18,013.98 points, and the Dow Jones Industrial Average advanced by 1.26% to record 42,025.19 points.
Effects of interest rate cuts
The Federal Reserve cut the deposit and lending rates by 0.5% to a range of 4.75% and 5%, which caused a wave of rises and falls in precious metals, commodities and currencies globally.
The US Federal Reserve has sought for two and a half years to reduce price levels that rose after the outbreak of the Russian-Ukrainian war. At a time when the world was recovering from the effects of the Corona pandemic, this was a driver for increased demand for goods and services.
The US consumer price index fell in August to 2.5% on an annual basis from 2.9% recorded in July, but the index is still above the US central bank’s long-term target of 2%.
Calls for a rate cut have increased following pressure from markets after data from the US labour market released last month led to expectations of an economic recession, causing a global wave of declines in stock markets led by US stock exchanges.
Rising unemployment coupled with a slowing labor market means slower activity among listed companies among the total companies.
As interest rates fall, investment declines and demand for other investment instruments increases.
Thus, with the US interest rate cut, spot gold prices rose to their highest level ever, exceeding $2,600 per ounce.
The prices of commodities priced in dollars – including oil – also rise after the US interest rate is lowered to increase demand for them, as one dollar will be useful in purchasing more of these commodities compared to what it was before when it rose.
