S&P 500 surges to record high on euphoria over Fed rate cut

The S&P 500 surged to intra-day record highs on Thursday, the day after the Federal Reserve cut interest rates by 50 basis points and indicated more rate cuts were on the horizon.

Heavyweight stocks that have enjoyed much of this year’s stock market rally made fresh gains, with Tesla surging 7%, Apple rallying nearly 4% and Meta Platforms climbing over 4%.

AI powerhouse Nvidia rose 4.8%, helping lift the PHLX semiconductor index almost 5%.

Better-than-expected jobless claims data further stoked global risk appetite.

On Wednesday, the Federal Reserve announced the rate cut at the high end of expectations, and said it had greater confidence inflation was under control. Fed Chair Jerome Powell said the U.S. economy remained strong and the central bank would decide on the appropriate pace of future rate cuts.

“The Fed has sanctioned a pretty strong economic picture here, and so we’re just seeing the money flow back into some of the sectors that have perhaps underperformed so far this quarter,” said James Ragan, Director of Wealth Management Research at D.A. Davidson.

The small-cap Russell 2000 index rose 2.4% as lower interest rates boosted prospects of reduced operating costs and greater profits.

The S&P 500 was last up 1.87% at 5,723.44 points. The Nasdaq gained 2.70% to 18,048.05 points, while the Dow Jones Industrial Average was up 1.42% at 42,090.90 points.

The rules apply to the highly technical space between prices stock sellers are willing to accept in a trade and what buyers are willing to pay, known as the bid-ask spread.

Allowing prices to be quoted in increments, or “tick sizes,” of less than a penny will result in narrower spreads, cutting transaction costs and allowing for more aggressive pricing, according to the SEC.

“This is an industry where people will sell their grandmothers for four basis points,” James Angel, a professor at Georgetown University’s McDonough School of Business, said ahead of the vote. “But for the retail investor who buys and sells a share here and there, they’re not gonna notice a difference.”

Prior to the vote, SEC officials told reporters that 2023 data showed that as many as 1,700 stocks would have qualified as “tick constrained” under the rule due to be adopted, meaning a weighted average of the spread was 1.5 cents or less over a certain period.

The SEC’s decision not to include pricing increments smaller than half a cent represents a likely win for industry, which had favored the half-penny increment and objected to sizes included in the 2022 proposal that were as small as a fifth or a tenth of a cent.

Of the 11 S&P 500 sector indexes, eight rose, led by information technology, up 3.32%, followed by a 2.12% gain in communication services.

BofA Global Research said it now expects a total of 75 basis points in rate cuts by the end of this year, steeper than its previous forecast of 50 bps.

Evercore ISI data going back to 1970 showed the S&P 500 has posted an average 14% gain in the six months following the first reduction of a rate-cutting cycle.

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 S&P 500 banks index rose 2.6%, with gains in Citigroup and Bank of America after they lowered their respective prime rates.

Fertility benefits management firm Progyny plunged 33% after a significant client notified the company it had elected to exercise a 90-day option to terminate its services agreement.

Advancing issues outnumbered falling ones within the S&P 500 by a 2.8-to-one ratio.

Across the U.S. stock market, advancing stocks outnumbered falling ones by a 3.9-to-one ratio.