Wall Street reached new heights on Thursday, with the Dow Jones and S&P 500 posting record highs as traders bet the Federal Reserve can achieve a "soft-landing".
S&P 500 closed above 5,700 for the first time after jumping 1.7 per cent on the day to 5,713.14. The Dow Jones Industrial Average crossed 42,000 for the first time after rising 525.18 points, or 1.27 per cent, to close at 42,028.28. The Nasdaq Composite soared 2.51 per cent.
Tech stocks also rallied, with Nvidia jumping 3.97 per cent. Meta and Apple were up 3.93 and 3.71 per cent, respectively.
Wall Street's rally followed optimism across Europe and Asia after the Fed delivered its first interest rate cut in four years on Wednesday.
The Fed's aggressive 50-basis point cut, which lowered its benchmark rate to 4.75 per cent to 5.00 per cent, marked a significant turning point for the central bank after holding rates steady for more than a year.
While major US indexes ended Wednesday relatively unchanged after the announcement, Art Hogan, chief market strategist at B Riley Wealth, said Thursday's movement was a better reflection of market reaction.
“Today, you have much better chance of capturing the entire day and that seems to be what markets are doing here,” Mr Hogan said.
New economic data added further optimism towards soft-landing hopes, where inflation and interest rates come down without a sharp increase in unemployment.
Before Thursday's opening bell, a Commerce Department report showed jobless claims last week at 219,000, lower than the 230,000 estimate, supporting the idea that the US economy is not headed towards a recession.
Entering this week's two-day meeting, Fed officials were thought to be considering a more traditional 25-basis-point cut or the more aggressive 50 bps cut.
Fed chairman Jerome Powell framed the larger cut in a more optimistic perspective, saying acting now showed the Fed was committed to not falling behind the curve on cutting rates.
“We made a good, strong start to this, and that's really, frankly, a sign of our confidence – confidence in inflation is coming down towards 2 per cent on a sustainable basis,” Mr Powell said, referring to the Fed's long-term target.
He also indicated that with inflation now easing, Fed officials can turn to protecting the US labour market and economic growth.
That turn was a long time coming for markets who had priced in a two-thirds probability that the Fed would begin with the aggressive 50 bps cut.
"We expected this at the beginning of this year, but the inflation indicators hadn’t come down as much as the Fed would have liked,” Cetin Duransoy, chief executive of online banking marketplace Raisin, told The National.
Mr Powell cautioned markets that the initial rate cut should not be seen as the new normal, saying the move allows the Fed to “recalibrate” interest rates towards a more neutral level.
“I do not think that anyone should look at this and say, 'Oh, this is the new pace',” he said.
Markets are pricing in more cuts totalling 75 bps for the rest of the year, according to the CME FedWatch tool. Projections released by the Fed on Thursday showed the median forecast was it will cut rates by an additional 50 bps this year, followed by a full percentage point in 2025.
The Fed holds two more meetings this year, in November and December.
Business Insights
- As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
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Conflict, drought, famine
Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.
Band Aid
Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.
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“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
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