US stocks climb sharply; benign jobless claims add to Fed cut cheer

Investing.com--U.S. stocks surged Thursday, boosted by benign labor market data in the wake of the Federal Reserve starting its easing cycle with a substantial half percentage point reduction.

At 09:35 ET (13:35 GMT), the Dow Jones Industrial Average rose 535 points, or 1.3%, the S&P 500 gained 88 points, or 1.6%, and the NASDAQ Composite climbed 395 points, or 2.3%. Jobless claims rise by less than expected

The number of Americans filing for first-time unemployment benefits rose by less than anticipated last week, with initial jobless claims coming in at 219,000 in the week ended on Sept. 14, compared with an upwardly revised 231,000 in the prior week.

Economists had forecast a consensus figure of 230,000.

The US central bank started its latest rate-cutting cycle on Wednesday, trimming interest rates for the first time since March 2020 by a hefty 50 basis points to a range of 4.75% to 5%.

Fed Chair Jerome Powell said that risks between higher inflation and more labor market weakness were now evenly balanced, and that the central bank was likely to cut rates further amid growing confidence that inflation will fall.

The reduction marks the beginning of an easing cycle that is likely to see rates fall further in the coming months. The Fed said a bulk of policymakers expect two more 25 bps cuts this year, but markets expect more.

Citi expects the Fed to cut rates by another 50 bps in its November meeting. Don’t hold out for ultra-low rates - Powell

Still, enthusiasm over the future cuts was limited by Powell stating that the Fed did not intend to return to an era of ultra-low interest rates. The central bank had slashed rates to near negative levels to offset the impact of the COVID-19 pandemic.

The Fed chair said the central bank’s neutral rate was likely to be significantly higher than it was in the past, although he did not specify just how much. Darden soars after Uber deal

There are more earnings to digest Thursday, including from shipping giant FedEx (NYSE:FDX ), and homebuilder Lennar Corporation (NYSE:LEN ).

Darden Restaurants (NYSE:DRI ) stock rose 9% after the Olive Garden-owner said it has entered into a delivery deal with Uber Technologies (NYSE:UBER ).

Dell Technologies (NYSE:DELL ) stock added over 3% after the PC-maker declared a quarterly cash dividend. Crude rises after Fed cut

Crude prices rose after the large Fed interest rate cut raised hopes of increased economic activity in the world’s largest consumer, but concerns over global demand lingered and capped gains.

By 09:35 ET, the Brent contract gained 0.7% to $74.12 per barrel, while U.S. crude futures (WTI) traded 0.8% higher at $70.41 per barrel.

US government data released on Wednesday showed a bigger-than-expected, 1.63 million barrel draw in inventories .

While the draw was much bigger than expectations for a draw of 0.2 mb, it was also accompanied by builds in distillates and gasoline inventories.

(Ambar Warrick contributed to this article.)

Source: Investing.com