Optimism About Soft Landing Contributes To Rally On Wall Street

After ending Wednesday’s session moderately lower following late-day volatility, stocks moved sharply higher during trading on Thursday. The major averages all showed strong moves to the upside, with the Dow and the S&P 500 reaching new record closing highs.

The major averages pulled back off their best levels late in the trading session but remained firmly positive. The Dow jumped 522.09 points or 1.3 percent to 42,025.19, the Nasdaq soared 440.68 points or 2.5 percent to 18,013.96 and the S&P 500 surged 95.38 points or 1.7 percent to 5,713.64.

The rally on Wall Street came as traders continued to digest the Federal Reserve’s decision on Wednesday to slash interest rates by half a percentage point.

With the Fed saying officials have gained greater confidence inflation is moving sustainably toward its 2 percent target, the central bank lowered the target range for the federal funds rate by 50 basis points to 4.75 to 5.00 percent.

The Fed was almost universally expected to cut rates for the first time since March 2020, but there was some debate over whether it would lower rates by 25 or 50 basis points.

Fed officials also forecast continued rate cuts over the coming months and into next year, generating optimism the central bank will be able to engineer a soft landing for the economy.

Adding to the optimism about the economy, the Labor Department released a report showing first-time claims for U.S. unemployment benefits unexpectedly fell to a nearly four-month low in the week ended September 14th.

The report said initial jobless claims slid to 219,000, a decrease of 12,000 from the previous week’s revised level of 231,000.

Economists had expected jobless claims to come in unchanged compared to the 230,000 originally reported for the previous week.

With the unexpected decline, jobless claims fell to their lowest level since hitting 216,000 in the week ended May 18th.

Sector News

Semiconductor stocks turned in some of the market’s best performances on the day, with the Philadelphia Semiconductor Index soaring by 4.3 percent.

Substantial strength was also visible among steel stocks, as reflected by the 3.5 percent spike by the NYSE Arca Steel Index. The index ended the day at its best closing level in over a month.

Networking stocks also showed a significant move to the upside, driving the NYSE Arca Networking Index up by 3.1 percent to a record closing high.

Banking, oil service, and housing stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index surged by 2.1 percent, while China’s Shanghai Composite Index climbed by 0.7 percent.

The major European markets also showed strong moves to the upside on the day. While the French CAC 40 Index spiked by 2.3 percent, the German DAX Index shot up by 1.6 percent and the U.K.’s FTSE 100 Index jumped by 0.9 percent.

In the bond market, treasuries extended the pullback seen over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.5 basis points to 3.740 percent.

Looking Ahead

Following several key economic events earlier this week, the economic calendar for Friday is relatively quiet, potentially leading to light trading activity.

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