Stocks jumped out of the gate Thursday and never looked back as investors belatedly cheered the Federal Reserve's jumbo-sized rate cut from the day before.
At the closing bell, the Dow Jones Industrial Average was up 1.3% at 42,025 and the S&P 500 had gained 1.7% to 5,713 – new record closes. The Nasdaq Composite, meanwhile, rose 2.5% to 18,013, but remains about 3% off of its all-time closing high of 18,647.45 from mid-July.
The Fed caught most of Wall Street off-guard Wednesday when it lowered the federal funds rate by a half-percentage point – more than the quarter-percentage point many folks were anticipating.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Concerns that this was done because the economy is worse off than we think sparked a late-day reversal for stocks yesterday. However, these worries were quickly brushed aside today thanks in part to an encouraging update on the labor market.
Specifically, the Labor Department said this morning that initial jobless claims fell by 12,000 last week to 219,000.
Existing home sales slide in August
Elsewhere on the economic calendar, data from the National Association of Realtors showed existing home sales declined 2.5% in August from the month prior, to a seasonally adjusted annual rate of 3.86 million. Year-over-year, sales were down 4.2%.
"Despite the overall economy holding up, the interest-sensitive housing market continues to take a beating," says Priscilla Thiagamoorthy, senior economist at BMO Capital Markets. "While mortgage rates are now well below the near 8%-peak, many potential buyers remain reluctant to make a purchase until costs come down further amid the poorest affordability in decades."
Darden pops on Uber delivery deal
In single-stock news, Darden Restaurants (DRI) stock rallied 8.3% after the Olive Garden parent announced a new food delivery partnership with Uber Technologies (UBER, +2.4%). This helped offset the company's top- and bottom-line fiscal Q1 earnings miss.
"We like DRI's partnership with UBER to introduce on-demand delivery, with Olive Garden as the first pilot to expand its reach and exposure to its customers," says CFRA Research analyst Shreya Gheewala. However, she maintained a Hold rating on the consumer discretionary stock amid expectations for "limited upside potential for DRI given ongoing macroeconomic headwinds and inflationary pressures."
Alibaba rises after releasing open-source AI models
Alibaba Holdings (BABA) stock increased 4.8% after the Chinese e-commerce giant announced the release of more than 100 AI models and a new text-to-video tool.
Today's gains extend BABA's rally, with shares up 23% since late June. And Jefferies analyst Thomas Chong (Buy) thinks there's more room to run.
"Alibaba has multiple growth drivers in the years ahead, in our view, with its core marketplace a strong cash cow that enjoys secular growth momentum amid consumption upgrade in China, thanks to solid execution and technological strength in digitalizing the retail sector with enhanced efficiencies," he wrote in a note to clients.
AMD stock has its best day in six months
Amazon.com (AMZN) stock rose 1.9% after the e-commerce powerhouse announced a pay hike for front-line workers and the inclusion of Amazon Prime as a benefit. However, the rise in the Dow Jones stock was more likely associated with overall optimism in the market surrounding the Fed's rate cut announcement.
The excitement surrounding the Fed certainly fueled upside for several stocks, including a number of chipmakers. Advanced Micro Devices (AMD), for one, surged 5.7% – its best day since February 29, according to Dow Jones Market Data.
The semiconductor stock is up more than 50% in the past 12 months and Wall Street sees even bigger gains ahead. According to S&P Global Market Intelligence, analysts' average price target of $186.91 represents implied upside of nearly 20% to current levels. Plus, the consensus recommendation is Buy, and with strong conviction.
Related content
-
Does Kansas Tax Social Security Benefits?Social Security The Sunflower State’s new tax package will have a widespread impact on retirees and young families. Here’s what you can expect.
-
Alibaba Stock's a Strong Buy After Open-Source AI RevealAlibaba stock is higher Thursday after the Chinese e-commerce giant released over 100 AI models, but Wall Street was already bullish on BABA. Here's what you need to know.
-
Alibaba Stock's a Strong Buy After Open-Source AI Reveal
Alibaba stock is higher Thursday after the Chinese e-commerce giant released over 100 AI models, but Wall Street was already bullish on BABA. Here's what you need to know.
-
Is Amazon Stock Still a Buy After Pay Hikes, Prime Benefit?Amazon announced a pay increase for its fulfillment and transportation employees, as well as a free membership to Prime. Here's what investors need to know.
-
Darden Stock Pops After Teaming Up With Uber Delivery: What to KnowDarden Restaurants' Q1 earnings came up short of expectations, but bulls are cheering the Olive Garden parent's new food delivery partnership with Uber.
-
With Fixed Indexed Annuities, Zero Is Your HeroFixed indexed annuities are retirement tools that can offer potential growth as well as principal protection by limiting market risk. Here's how they work.
-
Before Buying Your First Home, Get These Three Ducks in a RowWith mortgage rates higher than we're used to, making sure you can comfortably afford to buy your first home is more important than ever.
-
Stock Market Today: Stocks Swing Lower After Fed's Jumbo Rate CutThe Federal Reserve caught plenty of folks off-guard with its jumbo-sized half-percentage point rate cut.
-
Fed Goes Big With First Rate Cut: What the Experts Are SayingFederal Reserve A slowing labor market prompted the Fed to start with a jumbo-sized reduction to borrowing costs.
-
Stellantis Stock Shrugs Off UAW Strike Authorization Vote: What to KnowThe UAW will hold a vote to authorize a strike against Stellantis for failing to hold up its end of a 2023 contract. Here's what this means.
