Stocks Rally a Day After Feds Big Interest Rate Cut

The S&P 500 was on course to notch a record on Thursday after a momentous cut to interest rates from the Federal Reserve invigorated a market rally.The index rose roughly 1.7 percent by midday, climbing past its last closing record, reached in July.The Russell 2000 index of smaller companies more sensitive to the ebb and flow of the economy rose about 1.8 percent on Thursday.The S&P 500 has repeatedly butted up against the record in recent weeks, lifted recently as investors anticipated a big cut to interest rates.

On Wednesday, the Fed met those expectations by lowering its benchmark interest rate by half of a percentage point, double the typical quarter-point adjustment the central bank typically makes.Though stocks had wobbled in the immediate aftermath of the rate cut, closing slightly lower on Wednesday, optimism took hold in the markets overnight.It often takes the market a day or two to determine a path after a big event like the Fed meeting.

Lower rates are generally good news for stock investors: lower borrowing costs boost corporate profits and increase the value of investors’ holdings.“This can only be a good thing for equities,” said Colin Graham, head of multi asset strategies at Robeco, an asset management firm.Investors also have to consider, however, that the Fed’s aggressive cutting could mean that policymakers are worried about the economy.On Wednesday, Jerome H.Powell, chair of the Federal Reserve, appeared to tread that tightrope carefully.“The U.S.

economy is in a good place, and our decision today is designed to keep it there,” Mr.Powell said at a news conference after the rate decision was announced.Quincy Krosby, chief global strategist at the retail brokerage firm LPL Financial, said that “they made it clear that this is not an emergency rate cut,” which would have spooked the market.Financial markets themselves may have been at play in the Fed’s decision to opt for a bigger half percentage cut, said Naomi Fink,...