Stock Market Surges Amid Rate Cut and Economic Optimism

The stock market reached new highs this week as investors flocked to riskier assets like tech stocks and cryptocurrencies, following the Federal Reserve’s decision to cut interest rates by 0.5%. This marks a shift from its aggressive rate hikes, which had pushed interest rates to a 23-year high. Major indexes responded positively, with the S&P 500 and Dow each gaining 0.6%, and the Nasdaq climbing 1%. The S&P 500 set its 42nd record high of the year, while the Dow marked its 32nd.

Economic indicators further fueled optimism. The Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge, rose 2.2% in August, down from 2.5% in July, edging closer to the central bank’s 2% target. Additionally, the US economy grew by 3% in the second quarter, reflecting solid economic fundamentals.

The housing market also benefited from the Fed’s rate cut, as 30-year fixed mortgage rates hit their lowest level since September 2022. This prompted a 20% surge in mortgage refinance applications. Investors are now focused on the upcoming September labor report, which is expected to show an increase of 142,000 jobs and a slight dip in unemployment to 4.2%.

Globally, China’s stock market soared after its central bank implemented measures to boost the economy, including a rate cut. Meanwhile, oil prices declined, with gas averaging $3.21 per gallon, and Saudi Arabia reportedly abandoning its $100-a-barrel oil price target. Gold futures retreated from record highs, and Bitcoin rallied, trading around $65,747. These developments highlight renewed investor confidence in the face of shifting monetary policies and economic stabilization.