[New York Stocks] All Three Major Indexes Hit Record Highs as Fed Resumes Rate Cuts... Small and Mid-Cap Russell 2000 Also at Peak

Buying Momentum Returns as Rate Cuts Resume
Intel Jumps 23% on Nvidia Investment News
Small and Mid-Cap Stocks Rally as Rate Cut Beneficiaries
Unemployment Claims See Largest Drop in Four Years

All three major U.S. stock indexes closed higher on September 18 (local time) in New York. The previous day's decision by the Federal Reserve (Fed) to resume interest rate cuts injected new energy into the stock market, pushing all three indexes to fresh record highs. Small and mid-cap stocks surged on expectations of benefiting from rate cuts, while Intel soared more than 20% following news that it would receive investment from Nvidia.

On this day at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average closed up 124.1 points (0.27%) at 46,142.42. The large-cap S&P 500 Index rose 31.61 points (0.48%) to 6,631.96, while the tech-heavy Nasdaq Composite gained 209.399 points (0.94%) to close at 22,470.725. With these gains, all three major indexes reached all-time highs.

The Russell 2000 Index, which is composed of small and mid-cap stocks, surged 60.352 points (2.51%) to 2,467.697, breaking its highest level in about three years and ten months since November 2021. Compared to large corporations, small and mid-sized companies typically hold less cash and rely more heavily on external financing such as loans, making them key beneficiaries of interest rate cuts.

By stock, Intel jumped 22.77%. The news that Nvidia would invest $5 billion in Intel to jointly develop semiconductors drove the stock price higher. Nvidia also climbed 3.49%. In contrast, Apple fell 0.46%, while Microsoft and Tesla declined by 0.31% and 2.12%, respectively.

The Fed's decision to cut rates played a decisive role in the day's rally. The previous day, the Fed decided at the regular Federal Open Market Committee (FOMC) meeting to lower the federal funds rate by 0.25 percentage points to a range of 4.0% to 4.25% per annum. This move came after maintaining a freeze for nine months since the rate cut in December last year. Recent weak employment data was a key factor behind the decision.

The Fed also indicated the possibility of two additional 0.25 percentage point cuts within the year, totaling 0.5 percentage points. This is one more cut than projected in the dot plot released in June. For 2026 and 2027, one additional 0.25 percentage point cut is expected each year. Fed Chair Jerome Powell described the decision as a "risk management cut." Although this comment initially weakened confidence in consecutive rate cuts and sent stocks lower the previous day, investors quickly refocused on the potential for economic recovery from lower rates, leading to a rebound within a day.

David Tepper, founder and president of Appaloosa Management, told CNBC, "I don't like the multiples (price-earnings ratios), but I have no other choice but to hold stocks," adding, "I don't fight the Fed, especially when the market says there will be at least one more rate cut by year-end." However, he warned that if the Fed cuts rates too aggressively, it could lead to overheating in the markets and the economy.

Robert Shain, managing director and partner at Blanke Schein Wealth Management, commented, "The Fed is cutting rates at a time when stock prices are at all-time highs and the economy is still growing," adding, "This is positive for the stock market."

The employment data released on this day showed stability. According to the U.S. Department of Labor, the number of new unemployment claims for the week of September 7-13 was 231,000, down 33,000 from the previous week's 264,000. This marks the largest decrease in four years and came in below Bloomberg's forecast of 240,000. Continuing claims for unemployment benefits for the period from August 31 to September 6 stood at 1.92 million, slightly down from the previous week's 1.927 million, also lower than market expectations of 1.95 million. This result contrasts with the recent upward trend in claims.

U.S. Treasury yields are on the rise. The yield on the benchmark 10-year Treasury note climbed 3 basis points (1bp=0.01 percentage point) from the previous day to 4.11%, while the yield on the 2-year Treasury note, which is sensitive to monetary policy, rose 2 basis points to 3.57%.