S&P 500, Nasdaq, Dow Reach Record Highs After Fed Signals More Cuts; Jobless Claims, Manufacturing Data Beat Consensus
The S&P500, Nasdaq, and the Dow Jones Industrial Average surged to record highs on Thursday, a day after the US Federal Reserve trimmed the federal funds rate target by 25 basis points to 4% to 4.25%, in line with market expectations. The updated Summary of Economic Projections now expects two more rate cuts in 2025.
According to the Federal Open Market Committee, the decision was driven by indicators like a slump in job gains, an uptick in unemployment rate, elevated inflation, and a moderation of economic activity in the first half of 2025.
‘In the near term, risks to inflation are tilted to the upside and risks to employment to the downside — a challenging situation,’ Fed Chair Jerome Powell said in a press conference after the FOMC statement. ‘The marked slowing in both the supply of and demand for workers is unusual. In this less dynamic and somewhat softer labour market, the downside risks to employment appear to have risen.’
He added that higher tariffs are driving up prices in several goods categories, but their impact on economic activity and inflation remains to be seen.
On Thursday, US indexes climbed to a record high, led by the technology and the industrials sectors. The market move could be attributed to the Fed’s decision as well as better-than-expected Thursday economic reports on US jobless claims and manufacturing industry reports.
According to the US Department of Labor’s latest report, US initial jobless claims for the week ended 13th September declined by 33,000 to 231,000, more than reversing an increase to 264,000 in the week prior. The latest data was also below the 241,000 claims that was forecast by Bloomberg. The decline in jobless claims shows that ‘last week’s surge was a one-off,’ which was ‘inflated by a jump’ in Texas, said Thomas Simons, chief US economist at Jefferies.
Furthermore, the Federal Reserve Bank of Philadelphia’s Manufacturing Index also jumped to a surprise 23.2 in September from minus 0.3 in August. The print was well-above the 1.7 expected by Bloomberg. According to the manufacturing business outlook survey, nearly 40% of the companies reported increases in general activity in September, up from 30% in the month prior.
More recently, on Friday, US stock futures held steady close to record highs ahead of a call between US President Donald Trump and China‘s Xi Jinping, with investors expecting an update on a TikTok deal and easing US-China trade standoff.
Trump described a TikTok deal as all but completed and stressed that he is hopeful the countries can negotiate over trade. ‘On a much bigger scale, we’re pretty close to a deal,’ Trump said about talks with China.
However, he cautioned that the US may end up prolonging the tariff truce in place between the two nations, denting hopes for a conclusive trade pact. He said he thinks the current pause has ‘pretty good terms.’
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