Wall Street Extends Record Surge on Rate Cut Hopes
NEW YORK (AP) — Wall Street continued its record-setting rally on Thursday, with major indexes climbing as a nuanced set of U.S. economic data reinforced expectations that the Federal Reserve will implement its first interest rate cut of the year next week to stimulate the economy.
Market Milestones Continue
The S&P 500, a broad market benchmark, advanced 0.8%, closing at an all-time high of 6,587.47. This marked its third consecutive day of record closes, reflecting sustained investor optimism. The Dow Jones Industrial Average soared by 617.08 points, or 1.4%, to reach 46,108.00, also establishing a new peak. The technology-heavy Nasdaq composite likewise saw gains, rising 0.7% to 22,043.07, hitting its own record.
Federal Reserve Poised for Action
In the bond market, Treasury yields dipped following the economic reports. These data releases were among the final indicators influencing the Federal Reserve’s Monetary Policy Committee before its highly anticipated meeting next week. Analysts across Wall Street are in near-unanimous agreement that the central bank will move to lower its main interest rate, a decision poised to impact borrowing costs and investment across the nation.
Key Economic Indicators
Driving the expectation for a rate cut was a report indicating an increase in U.S. jobless claims last week. This rise in applications for unemployment benefits signals a potential uptick in layoffs, adding to recent discouraging signs in the labor market. After a period characterized by low hiring and low firing, a sustained increase in layoffs could put the job market in a more precarious position.
Market participants are navigating a delicate balance, hoping for an economic slowdown that is precisely calibrated—just enough to prompt the Fed to reduce rates, thereby boosting the economy and asset prices, but not so severe as to trigger a recession. The Federal Reserve, tasked with maintaining both price stability and maximum employment, faces a complex decision given the dual pressures of a softening job market and persistent inflation.
Adding to the mixed economic picture, a separate inflation report released Thursday showed consumer prices continuing to rise faster than the Fed’s preferred 2% target. U.S. households experienced a 2.9% increase in the cost of food, gasoline, and other living expenses in August compared to a year prior. This represents a slight acceleration from July’s 2.7% inflation rate. Despite inflation remaining above target, traders are betting that the Fed will prioritize addressing the perceived weakening in the labor market over the slightly elevated inflation figures, acknowledging the short-term trade-off inherent in monetary policy.
Sectors and Stocks in Focus
Sector-wise, companies poised to benefit from lower interest rates saw notable gains. Real estate firms and homebuilders, in particular, rallied. Builders FirstSource, a supplier of construction materials such as cabinets and lumber, climbed 4.5% on the day.
Individual Stock Movers:
- Centene: The healthcare company surged 9% after reporting that its business results through August were aligning with its previously issued full-year profit forecast, a performance that surpassed analyst expectations.
- Opendoor Technologies: Shares of the online home-buying and selling platform skyrocketed 79.5%. This dramatic increase followed the announcement that the company had appointed Kaz Nejatian, formerly Shopify’s Chief Operating Officer, as its new CEO. Additionally, Opendoor revealed a $40 million investment from one of its founders and an investment firm connected to another founder.
- Warner Bros. Discovery: The entertainment giant leaped 28.9% amid reports that Paramount Skydance is preparing a bid to acquire the company. Paramount Skydance itself saw a 15.6% jump, having recently formed from Skydance’s acquisition of Paramount in August.
- Kroger: The grocery chain added 0.3% after reporting stronger-than-expected profits for its latest quarter, although its revenue marginally missed forecasts. Kroger also raised the lower end of its full-year profit outlook.
- Oracle: After a monumental 36% gain the previous day—its best performance since 1992—Oracle shares pulled back slightly, falling 6.2%.
Global Markets Roundup
Across global markets, European indexes ended the day higher. The European Central Bank (ECB) opted to maintain its interest rates at its latest meeting, following a series of earlier cuts. ECB President Christine Lagarde stated that future policy moves are “not on a predetermined path.” France’s CAC 40 rose 0.8%, and Germany’s DAX gained 0.3%. In Asia, markets were mostly positive, with stocks in Shanghai jumping 1.7%, though Hong Kong’s index fell 0.4%.
Bond Market Update
The yield on the benchmark 10-year Treasury note eased to 4.02% from 4.04% late Wednesday, reflecting the shift in investor sentiment regarding interest rate policy.
