Stocks surged on Thursday following the Federal Reserve’s announcement of a half percentage point cut in interest rates. The Dow Jones Industrial Average was up nearly 400 points, the S&P 500 was up 1.6%, and the Nasdaq was up over 2.5%. Fed Chair Jay Powell stated that the economy was in a good place, and by cutting rates, the Fed aimed to maintain its strength. The move is expected to encourage businesses and consumers to increase purchases and investments, leading to increased hiring.
Mortgage applications have increased as rates fell to their lowest level in two years in anticipation of the Fed’s decision. While unemployment has ticked down, it has climbed in recent months, potentially signaling a recession. Though layoffs are low, hiring has slowed, especially in white-collar occupations. The Fed has indicated a sensitivity to labor market weakness, with a majority of officials expressing concerns about rising joblessness.
Analysts suggest that weaker jobs data could lead to another rate cut beyond current forecasts. The next employment report will be released on October 4. While Powell described risks of inflation and unemployment as balanced, some believe the Fed is more concerned about downside risks to the labor market. This could lead to further rate cuts to support overall demand in the economy.
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