Wall Street Continues Record Ascent Amid Rate Cut Hopes
NEW YORK (AP) — Wall Street continued its unprecedented ascent on Thursday, with major U.S. stock indexes closing at record highs for the third consecutive day. Investors eagerly pushed stocks higher as a series of mixed economic reports reinforced expectations that the Federal Reserve will implement its first interest rate cut of the year as early as next week, aiming to invigorate the economy.
Market Performance Overview
The benchmark S&P 500 index climbed 0.8%, adding 55.43 points to close at an all-time high of 6,587.47. The Dow Jones Industrial Average surged by 617.08 points, or 1.4%, reaching 46,108.00, while the technology-heavy Nasdaq Composite gained 0.7%, or 157.01 points, to finish at 22,043.07. This broad market rally was accompanied by an easing of Treasury yields in the bond market, a typical reaction to increased prospects of lower interest rates.
The Federal Reserve’s Delicate Balancing Act
The Federal Reserve finds itself at a critical juncture, navigating its dual mandate of achieving maximum employment and stable prices. The latest economic data, released just days before the central bank’s pivotal meeting, provided a nuanced picture that market participants believe will tip the scales toward a rate cut.
One of the key reports indicated an increase in U.S. workers applying for unemployment benefits last week, signaling a potential rise in layoffs. This marks a shift from the previously observed “low-hire, low-fire” state of the labor market, suggesting a more pronounced slowdown in job growth. While a weakening job market is generally a negative economic indicator, Wall Street interprets it as a necessary condition to prompt the Fed to reduce borrowing costs.
Conversely, a separate report on inflation showed consumer prices continuing to rise, though in line with economists’ expectations. U.S. households faced a 2.9% increase in the cost of living in August compared to a year prior, a slight acceleration from July’s 2.7% inflation rate. This figure remains above the Fed’s long-term target of 2%, a target the central bank has been cautious not to overshoot, particularly with potential inflationary pressures from policies like President Donald Trump’s tariffs. However, traders are betting that the slowdown in the job market now outweighs inflation concerns in the Fed’s decision-making.
Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, articulated this dynamic, stating, “Right now, inflation is a key subplot, but the labor market is still the main story.”
Sectoral Shifts and Corporate Highlights
Companies poised to benefit from lower interest rates saw significant gains. Real estate and homebuilding sectors, for instance, rallied. Builders FirstSource, a supplier of construction materials like cabinets and lumber, climbed 4.5%.
- Centene jumped 9% after the healthcare company confirmed its business results through August were aligning with its previously issued full-year profit forecast, exceeding analyst expectations.
- Opendoor Technologies soared an impressive 79.5%. The online home buying and selling platform announced the appointment of Shopify’s chief operating officer, Kaz Nejatian, as its new CEO. The company also disclosed a $40 million investment from one of its founders, along with an investment firm linked to another founder.
- Warner Bros. Discovery leaped 28.9% following reports that Paramount Skydance, fresh off its acquisition of Paramount in August, is preparing a bid to purchase the entertainment giant. Paramount Skydance itself saw a 15.6% gain.
- Kroger added 0.3% after the grocer reported stronger-than-expected profits for its latest quarter, despite slightly missing revenue forecasts. The company also raised the lower end of its full-year profit outlook.
- Conversely, Oracle retreated 6.2%, giving back a portion of its nearly 36% monster gain from the previous day, which marked its best performance since 1992.
Global Market Snapshot
European stock markets generally ticked higher on Thursday. France’s CAC 40 rose 0.8%, and Germany’s DAX returned 0.3% after the European Central Bank (ECB) opted to keep its interest rates unchanged at its recent meeting. ECB President Christine Lagarde indicated that future policy moves are “not on a predetermined path.” In Asia, indexes were mostly higher, with Shanghai jumping 1.7% while Hong Kong fell 0.4%.
In the bond market, the yield on the 10-year Treasury note eased slightly to 4.02% from 4.04% late Wednesday, reflecting growing confidence in an impending U.S. rate cut.
