Stock market closes at new record heights, propelled by Intel-Nvidia partnership, Fed's interest rate reduction, and overall market boost
In a noteworthy turn of events, the Federal Reserve (Fed) announced a 25 basis point cut in interest rates on Wednesday, bringing the policy rate to a range of 4.00%-4.25%. This decision was in line with expectations, as stated in the FOMC's statement. However, Federal Gov. Stephen Miran was the sole dissenting voice, arguing for a 50-basis-point cut.
The FOMC's rate cut was seen as favorable for cyclical sectors by Seeking Alpha analyst Leo Nelissen, as it occurred in a context of solid GDP growth and rising inflation. This view was reflected in the performance of Wall Street's major averages, which ended mixed on Wednesday.
The Dow Jones Industrial Average (DJI) closed at an all-time high of 46,142.24 points, marking an increase of 0.3%. Similarly, the S&P 500 (SP500) and the Nasdaq Composite (COMP:IND) also closed at record highs, with the S&P 500 at 6,631.94 points, up 0.5%, and the Nasdaq Composite at 22,470.73 points, up 0.9%.
One of the key drivers of these record-breaking closes was the significant announcement made by tech giants Nvidia and Intel. On Tuesday, they revealed an important agreement to jointly develop chips for PCs and data centers. In this deal, Nvidia will acquire a stake worth 5 billion US dollars in Intel. As a result, Intel's stock closed with a gain of 22.8%, while Nvidia ended the day with a gain of 3.5%.
Meanwhile, the economic indicators showed a mixed picture. The Philly Fed Manufacturing Index jumped in September, blowing past consensus, indicating a strong recovery in the manufacturing sector. On the other hand, the August U.S. Leading Economic Index fell more than expected, down 0.5% MoM to 98.4, suggesting a potential slowdown in the broader economy.
Initial jobless claims dropped more than expected in the past week, signalling a continued improvement in the labour market. However, no new information was provided about the 10-year Treasury yield (US10Y) or the 2-year yield (US2Y). The 10-year Treasury yield rose 3 basis points to 4.12%, while the 2-year yield rose 2 basis points to 3.59%.
One of the most exciting developments outside of the Fed's rate cut was CrowdStrike's surge by 13% after updating targets during its Fal.Con 2025 event.
In conclusion, the financial markets saw a mix of record highs, significant deals, and some economic indicators showing promising signs, while others pointed towards potential slowdowns. The Fed's rate cut and the tech giants' collaboration are likely to have significant impacts on the coming weeks.
