On Thursday, the S&P 500 soared to all-time intraday highs, following the Federal Reserve’s decision to lower interest rates by 50 basis points and signal that further cuts may be on the way.
Major stocks that have driven much of this year’s rally saw new increases, with Tesla jumping 7%, Apple gaining nearly 4%, and Meta Platforms rising by over 4%.
AI giant Nvidia climbed 4.8%, contributing to a nearly 5% increase in the PHLX semiconductor index.
Positive jobless claims figures further boosted global investor confidence.
On Wednesday, the Federal Reserve revealed the rate cut exceeded expectations and expressed increased assurance that inflation was being managed. Fed Chair Jerome Powell noted the U.S. economy remains robust and that the central bank would evaluate the suitable speed for future rate cuts.
“The Fed has approved a fairly strong economic outlook here, which is prompting money to flow back into sectors that may have lagged this quarter,” stated James Ragan, Director of Wealth Management Research at D.A. Davidson.
The small-cap Russell 2000 index increased by 2.4% as lowered interest rates raised expectations for lower operating expenses and higher profits.
The S&P 500 was last observed up 1.87% at 5,723.44 points. The Nasdaq experienced a gain of 2.70% to 18,048.05 points, whereas the Dow Jones Industrial Average rose by 1.42% to 42,090.90 points.
The regulations pertain to the intricate space between the prices that stock sellers are willing to accept and what buyers are willing to pay, commonly referred to as the bid-ask spread.
Allowing prices to be quoted in increments, or “tick sizes,” of less than a penny is projected to lead to narrower spreads, reducing transaction expenses and enabling more competitive pricing, as per the SEC’s statements.
“This is a sector where people would do nearly anything for just four basis points,” remarked James Angel, a professor at Georgetown University’s McDonough School of Business, prior to the vote. “However, for retail investors who buy and sell shares occasionally, they’re unlikely to perceive any changes.”
Before the vote, SEC officials informed journalists that data from 2023 indicated that up to 1,700 stocks would have been classified as “tick constrained” under the impending rule, meaning a weighted average spread of 1.5 cents or less during a specific timeframe.
The SEC’s choice to exclude pricing increments smaller than half a cent appears to favor the industry, which advocated for the half-penny increment and opposed sizes proposed in 2022 that were as small as a fifth or a tenth of a cent.
Of the 11 sector indexes within the S&P 500, eight experienced gains, led by information technology, which saw an increase of 3.32%, followed by a 2.12% rise in communication services.
BofA Global Research has revised its expectations, now anticipating a cumulative 75 basis points in rate cuts by the end of this year, an increase from its earlier estimate of 50 basis points.
Data from Evercore ISI dating back to 1970 revealed that the S&P 500 historically achieved an average 14% increase in the six months after the initial cut in a rate-cutting cycle.
Historically, September has been a lackluster month for U.S. equities, with the S&P 500 recording an average decline of 1.2% since 1928.
The S&P 500 banks index rose by 2.6%, bolstered by gains in Citigroup and Bank of America after they adjusted their respective prime rates downward.
Shares of fertility benefits management firm Progyny plummeted by 33% after a major client informed the firm of its decision to invoke a 90-day option to terminate their services agreement.
Within the S&P 500, advancing stocks outnumbered declining ones by a ratio of 2.8-to-one.
Overall, in the U.S. stock market, advancing stocks outnumbered those in decline by a 3.9-to-one ratio.
