Wall Street: S&P 500, Dow Jones, NYSE Composite hit record highs after Fed bonanza rate cut

US stocks surged to record highs after the Federal Reserve delivered a major 50-basis-point interest rate cut, its first in four years. This decision has bolstered investor confidence, with the S&P 500 gaining 1.9 per cent, the Dow Jones Industrial Average rising 1.7 per cent, and the NYSE Composite Index hitting new intraday highs.

Initially, the markets responded with caution, showing only muted changes following the Fed’s announcement. However, the mood shifted as investors processed the broader implications of easing monetary policy. The stock rally marks a sharp contrast to Wednesday's performance, where the S&P 500 had dipped 0.3 per cent.

While the tech-focused Nasdaq Composite surged 2.99 per cent to an intraday high of 18,099.93, the S&P 500 surged 2.05 per cent to a lifetime high of 5,733.57. Similarly, NYSE Composite rose 1.43 per cent to hit a record high of 19,471.24.

Market analysts attributed this shift to growing optimism about the Fed’s efforts to manage inflation while supporting economic growth. Michael Purves, CEO of Tallbacken Capital Advisors, remarked, “If stocks are rallying, it’s more about the fact that the Fed meeting is behind us.”

Lower interest rates are expected to benefit smaller companies and value stocks, leading to significant gains in the small-cap focused Russell 2000, which jumped 1.9 per cent.

Ed Yardeni, founder of Yardeni Research, noted that with the Fed now stimulating the economy, the fears of a "hard landing" are dissipating. Investors now foresee better prospects for a “soft landing” where inflation is controlled without significantly hurting economic growth.

The US dollar remained steady, hovering near its lowest level in a year, as traders recalibrated their positions in light of the Fed’s move. However, volatility looms ahead, particularly with the upcoming quarterly expiration of stock options and futures contracts, which could inject uncertainty into the markets.

Despite the rate cut, Treasury yields continued to rise, with benchmark 10-year yields climbing to 3.75 per cent, reflecting investor concerns about the strength of the labor market and future inflation risks.

As markets digest the Fed's policy direction, attention will now shift to corporate earnings and upcoming economic data to further guide the macro narrative.