S&P 500 and Dow Jones Industrial Average Hit New Highs

The S&P 500 and the Dow Jones Industrial Average reached new intraday record highs on Thursday, following the Federal Reserve's decision to cut interest rates by 0.5 percentage points and forecast more rate cuts in the future.

• The S&P 500 gained 1.73%, reaching a new intraday high of 5,715.73.
• The Dow Jones Industrial Average rose 1.03% to a new intraday record of 41,931.70.
• The Nasdaq Composite increased 2.78% to 18,062.06.

Rate-Sensitive Growth Stocks Rally

Rate-sensitive growth stocks that have led the market's gains this year saw a significant boost, with technology giants like Microsoft, Tesla, and Apple posting strong gains.

• Microsoft gained 1.9%
• Tesla surged 7.1%
• Apple advanced 3.4%

Semiconductor and Small-Cap Stocks Outperform

Semiconductor stocks and small-cap stocks also performed well, as lower interest rates are expected to boost their profits and operating costs.

• The Philadelphia SE Semiconductor Index jumped 4.8%, with Nvidia, AMD, and Broadcom posting strong gains.
• The Russell 2000 index, which tracks small-cap stocks, rose 1.8%.

Expectations of Further Rate Cuts

Traders are now pricing in a 61.1% chance that the Federal Reserve will cut interest rates by another 25 basis points at its November meeting, according to the CME Group's FedWatch tool.

• BofA Global Research now anticipates a total of 75 basis points in rate cuts by the end of 2022, up from their previous forecast of 50 basis points.
• Historically, the S&P 500 has posted an average gain of 14% in the six months following the first rate cut in a rate-cutting cycle, according to Evercore ISI data.

Positive Outlook for the Economy and Labor Market

Despite concerns about the labor market potentially weakening, the Federal Reserve's projections reflect steady economic growth and lower unemployment, suggesting a potential soft landing for the economy.

• The jobless claims data for the week ended September 14 dropped to a four-month low, pointing to solid job growth in September.
• The Fed's messaging reassured markets that the economy is on good footing, and a soft landing is still the default expectation.

Bank Stocks Gain as Prime Rates Lowered

The broader banks index trended 2% higher, driven by gains in major banks like Citigroup and Bank of America, as they lowered their respective prime rates following the Fed's rate cut.

September Historically Weak but Showing Gains

While September has generally been a disappointing month for U.S. equities, with the S&P 500 notching an average loss of 1.2% since 1928, the index has gained over 1% so far this month.