US markets saw a historic day, with the S&P 500 surging past 5,700 and the Dow Jones breaking through the 42,000 mark for the first time. The Federal Reserve’s decisive 50 basis point rate cut fuelled a broad market rally, with investors embracing a risk-on sentiment. Tech stocks were at the forefront, benefitting from the lower borrowing costs and optimism surrounding future economic growth. Strong labour market data further lifted market confidence, reinforcing the belief that the Fed’s actions could help steer the economy toward a soft landing.

Key Takeaways:

  • Dow Breaks 42,000 for the First Time: The Dow Jones Industrial Average surged 522.09 points, or 1.26%, to close at a record 42,025.19, breaking through the 42,000 level for the first time in history. The rally was fuelled by optimism surrounding the Federal Reserve’s surprise rate cut and positive labour market data, which helped boost investor sentiment.
  • S&P 500 Breaks New Ground Above 5,700: The S&P 500 jumped 1.7%, closing at 5,713.64, marking the first time the index has broken the 5,700 mark. This surge was driven by strong performances in tech and financial stocks, with companies like Nvidia and JPMorgan Chase benefiting from the Fed’s rate cut, which is expected to spur growth across interest-sensitive sectors.
  • Nasdaq Surges, Gains Over 2.5%: The Nasdaq Composite soared 2.51% to end the day at 18,013.98, with tech stocks leading the rally. Nvidia rose nearly 4%, AMD jumped almost 6%, and Meta Platforms added 3.9%. Investors flocked to growth stocks as the Fed’s decision to lower rates by 50 basis points reignited risk-on sentiment.
  • Weekly Jobless Claims Fall Sharply: Weekly jobless claims dropped by 12,000 to 219,000, significantly below forecasts. This sharp decline in claims suggests resilience in the labour market despite concerns about economic slowdown. Investors took this as a positive sign that the economy may be headed for a soft landing, particularly in light of the Fed’s decision to ease monetary policy.
  • European Markets Rally After Fed and Bank of England Moves: European markets posted solid gains, with the pan-European Stoxx 600 up 1.36% and all major regional indices finishing higher. The FTSE 100 rose 0.91% to 8,328.72, the CAC 40 surged 2.29%, and Germany’s DAX added 1.55%. The Bank of England held its key interest rate steady at 5%, taking a cautious approach despite growing expectations for more rate cuts later this year. The central bank signalled that it is prepared to gradually ease policy as inflationary pressures begin to subside.
  • US Housing Market Struggles as Sales Hit 10-Month Low: Existing-home sales in the US fell by 2.5% in August, reaching an annualised rate of 3.86 million, the lowest level since October of last year. Rising home prices and mortgage rates have weighed on affordability, particularly for first-time buyers. However, the recent decline in mortgage rates following the Fed’s rate cut could help revitalise demand in the housing market, which has struggled with low inventory and high costs.
  • Oil Prices Rebound on Fed Cut and Geopolitical Tensions: West Texas Intermediate crude prices rose 1.61%, closing at $72.05 per barrel, while Brent crude gained 1.56%, settling at $74.80. Oil markets found support following the Fed’s rate cut, which is expected to boost economic activity and demand for energy. Additionally, escalating tensions between Israel and Hezbollah in the Middle East added upward pressure on oil prices, further supporting the rally.
  • Treasury Yields Edge Higher on Softer Recession Fears: US Treasury yields rose as investors interpreted the Fed’s rate cut as a positive sign for economic stability. The yield on the 10-year Treasury climbed nearly 4 basis points to 3.726%, while the 2-year Treasury yield dipped slightly to 3.594%. The rise in yields reflects growing confidence that the Fed’s actions may avert a recession and provide a softer economic landing.

FX Today:

  • EUR/USD Edges Higher Amid Fed Rate Cut Optimism: The EUR/USD pair pushed higher on Thursday, closing up at 1.1162 as traders digested the impact of the Federal Reserve’s 50 basis point rate cut. The pair held above key support levels, with buyers stepping in around the 50-period SMA near 1.1082, while immediate resistance is seen around 1.1160. A break above this level could see the pair testing the 1.1200 region in the near term. On the downside, if the pair retreats below 1.1080, further losses toward 1.1055 could be on the horizon, signalling a potential shift in momentum.
  • GBP/USD Rallies After Cautious BoE Decision: GBP/USD surged, closing at 1.3280 after the Bank of England held rates steady at 5%. The pair benefitted from a risk-on sentiment, lifted by both the BoE’s cautious stance and the Fed’s larger-than-expected rate cut. The pair found solid support near the 50-period SMA at 1.3142, with upside resistance seen around the 1.3300 psychological barrier. If GBP/USD breaks higher, the next target could be 1.3350. However, failure to clear this resistance could result in a pullback toward 1.3142, with the 100-period SMA at 1.3147 providing additional downside support.
  • AUD/USD Stalls as Resistance Caps Gains: AUD/USD saw limited movement on Thursday, closing at 0.6814 after a strong recovery from recent lows. The pair faces stiff resistance around 0.6820, with a breakout above this level necessary to confirm further gains. Support levels remain intact near the 50-period SMA at 0.6733, while the 200-period SMA at 0.6693 provides additional downside protection. A move above 0.6820 could open the door to further gains, targeting 0.6850, but failure to break higher may result in a pullback toward key support zones.
  • Gold Holds Support After Brief Spike, Eyes $2,600: Gold prices retraced slightly, trading at $2,587.05 after briefly testing resistance near $2,590. Despite the pullback, the precious metal remains well supported by the 50-period SMA at $2,552.83, suggesting that the broader uptrend remains intact. Buyers are expected to re-enter the market near this support level, with any break above $2,590 potentially driving gold higher toward the $2,600 psychological barrier. However, if profit-taking occurs, the next key support level lies at the 100-period SMA at $2,528.37.

Market Movers:

  • Tesla Soars on Tech Rally Post-Fed Rate Cut: Tesla shares jumped over 7% on Thursday, gaining from the broader tech rally spurred by the Federal Reserve’s 50 basis point rate cut. The surge in Tesla stock contributed to the Nasdaq’s strong performance, with the index closing up 2.51% at 18,013.98. 
  • Nvidia Pops Nearly 4% as Rate Cut Fuels Risk-On Sentiment: Nvidia shares rose 3.9% as the Fed’s decision to lower interest rates spurred investor confidence in high-growth tech stocks. The company saw significant inflows as traders piled back into the semiconductor sector, helping lift the Nasdaq to a new all-time high. Similarly, AMD surged almost 6%, further highlighting investor enthusiasm for tech in the wake of the rate cut.
  • Meta Platforms Gains on Rate Cut Momentum: Meta Platforms advanced 3.9% on Thursday, following the Fed’s aggressive rate cut. The stock saw strong buying activity as lower interest rates made high-growth tech companies more attractive to investors. Meta’s gains helped push the Nasdaq Composite up by 2.51%, as tech stocks across the board benefited from the more accommodative monetary policy.
  • JPMorgan Chase Climbs as Financials Benefit from Fed Cut: Shares of JPMorgan Chase gained 1.4% on Thursday, with financial stocks among the beneficiaries of the Fed’s rate cut. Investors flocked to the sector as lower borrowing costs are expected to stimulate economic growth, providing a boost to banks and other financial institutions.
  • Alibaba Rises Nearly AI Innovations and Tech Rally: Alibaba shares rose 4.9% after launching over 100 new open-source artificial intelligence models, signalling its intent to compete with domestic rivals. The firm’s announcement comes as tech stocks across the globe surged in response to the Fed’s aggressive rate cut, with Alibaba among the key beneficiaries.
  • Edgewise Therapeutics Skyrockets on Positive Trial Results: Edgewise Therapeutics saw its shares soar 54% after announcing positive top-line trial data for its heart disease treatment. The promising results spurred a massive inflow of investor interest, positioning the biopharmaceutical company for future growth.
  • Mobileye Surges as Intel Confirms Stake Retention: Mobileye shares surged 15% on Thursday after Intel announced it had no plans to divest its majority stake in the company. The news reassured investors and sparked a strong rally in Mobileye stock, further boosting sentiment in the tech sector.
  • Darden Restaurants Climbs Despite Earnings Miss: Darden Restaurants gained 8.2% after announcing a multiyear collaboration with Uber for on-demand delivery, starting later this year. This news helped offset weaker-than-expected earnings and revenue in the company’s latest quarterly report. Uber shares also rose over 2%, reflecting optimism around the partnership.

As the markets closed on Thursday, investor optimism surged following the Federal Reserve’s unexpected 50 basis point rate cut, propelling the Dow Jones to a record close above 42,000 and the S&P 500 past 5,700 for the first time. Tech stocks led the rally, with major players like Nvidia, AMD, and Meta Platforms seeing significant gains. European markets also profited from central bank decisions, with the Bank of England holding rates steady and signalling future cuts, while Asian markets rallied as Japan’s Nikkei posted strong gains. The housing market showed continued weakness with a drop in US existing-home sales, but oil prices rebounded, supported by Middle Eastern tensions and falling US stockpiles. With the Fed’s rate cut in the spotlight, investors are closely watching how the softer monetary policy will influence future market directions and economic growth.