Stock market today: Wall Street climbs to record highs as jubilation spreads across markets worldwide

NEW YORK — Wall Street climbs to record highs Thursday as delayed jubilation sweeps markets worldwide after Federal Reserve decision sharp drop in interest rates.

THE&The P 500 index rose 1.8% in afternoon trading, topping its all-time closing high set in July. The Dow Jones Industrial Average rose 533 points, or 1.3%, and is on track to surpass its record high. set for MondayThe Nasdaq Composite Index was up 2.8% as of 12:26 p.m. Eastern time.

The recovery was broad-based, with the company behind Olive Garden and Ruth’s Chris, Darden Restaurants, helping lead the way with an 8.5% jump after saying its sales trends had improved since a sharp decline in July. It also announced a delivery partnership with Uber.

Nvidia, meanwhile, rose 5.2% and was once again the most powerful force in driving the S&P 500. The drop in interest rates somewhat mitigates criticism that its stock price and other influential Big Tech seems too expensive following the frenzy around artificial intelligence technology.

Wall Street’s gains followed a rally in European and Asian markets after the Federal Reserve made its first interest rate cut in more than four years late Wednesday.

It was a historic decision, closing the door on a series of measures in which the Fed had kept its main interest rate at a 20-year low, in the hope of slowing the U.S. economy enough to curb high inflation. inflation came down from its peak two summers agoFed Chairman Jerome Powell said the Fed could focus more on maintaining the strength of the labor market and the economy get out of a recession.

Wall Street’s initial reaction to Wednesday’s decline was a yawnafter markets had already been rallying for months on expectations of upcoming rate cuts, and stocks eventually edged lower after swinging a few times.

“Yet we come in today and we see a reversal of fortunes,” said Jonathan Krinsky, chief market technician at BTIG. He said he didn’t expect stocks to see such a surge on Thursday.

Some analysts said it might have been a relief that Fed chief Powell was able to sort things out at his news conference and suggest that the deeper-than-usual tapering was just a “recalibration” of policy and not an urgent step it needed to take to avoid a recession.

That has bolstered hopes that the Federal Reserve can successfully walk the tightrope and bring inflation under complete control without a recession. So too have two economic reports released Thursday. One showed Fewer workers filed for unemployment benefits welfare benefits last week, another sign that layoffs across the country remain low.

Still, pressure remains on the Fed as the labor market and hiring have begun to slow under the weight of higher interest rates. Some critics say the central bank waited too long to cut rates and may have hurt the economy.

Powell, however, said Fed officials are in no “rush to get there” and would make policy decisions at each successive meeting based on what the incoming data says.

Some investment banks have raised their forecasts for the Federal Reserve’s interest rate cut, anticipating an even deeper cut than Fed officials have been calling for. Federal Reserve officials released forecasts Wednesday indicating they expect interest rates to potentially be cut by another half percentage point in 2024 and one percentage point in 2025. The federal funds rate is currently in a range of 4.75% to 5%.

Lower interest rates help financial markets in two important ways. They ease the drag on the economy by making it easier for U.S. households and businesses to borrow money, which can accelerate spending and investment. They also boost prices of everything from gold to bonds to cryptocurrencies. Bitcoin soared to about $63,000 on Thursday, up from about $27,000 a year ago.

There’s an adage that suggests investors shouldn’t “fight the Fed” and ride the rising tide when the central bank cuts interest rates, and that’s what Wall Street did Thursday. But this business cycle continued to shatter conventional wisdom after the COVID-19 pandemic created a flash recession that led to the worst inflation in generations.

One concern that remains on Wall Street is that inflation may be harder to control than in the past. And while lower rates can help boost the economy, they can also fuel inflation.

The United States to come presidential election It could also fuel uncertainty in the market. There are concerns that Democrats and Republicans could push for policies that would increase U.S. government debt, which could keep upward pressure on interest rates regardless of what the Fed does.

Nor does history offer much guidance on how things might play out, given the unusual nature of the conditions. This appears to be the period with the highest rate-cutting expectations of any previous easing cycle, according to Bank of America strategists.

This year’s economic conditions may look a bit like those of 1995, but unfortunately “there are no great analogues,” strategists led by Alex Cohen wrote in a report from BofA Global Research.

In the bond market, the yield on the 10-year Treasury note edged up to 3.74% from 3.71% late Wednesday. The yield on the two-year Treasury note, which more closely tracks expectations of Fed action, fell to 3.60% from 3.63%.

On foreign stock markets, indices jumped 2.3% in France, 2.1% in Japan and 2% in Hong Kong.

The FTSE 100 rose 0.9% in London after the Bank of England’s decision kept interest rates unchangedThe Bank of Japan will announce its latest interest rate decision on Friday.

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AP Business reporters Matt Ott and Elaine Kurtenbach contributed to this report.