Wall Street erupted in celebration on Thursday as the Federal Reserve delivered a surprising half-point interest rate cut, a move that sent the Dow Jones Industrial Average soaring 522 points, or 1.3%, to a historic peak above the 42,000 mark for the first time. The S&P 500 index also hit unprecedented heights, increasing 1.7% and surpassing the 5,700 threshold. The tech-heavy Nasdaq Composite was no slouch either, with a robust gain of 2.5%.

Leading the charge were tech titans, with Nvidia's shares surging 4%, Tesla's stock powering ahead with a 7.4% increase, Meta Platforms lifting 3.9%, and Apple's shares rising a solid 3.7%. The positive sentiment from the Fed's decision rippled across the Pacific, with Japan's Nikkei index rising 2%, South Korea's Kospi climbing 1%, and Hong Kong's Hang Seng index advancing 1.3% in Friday's morning session.

The Federal Reserve's aggressive rate reduction marked the first since the Covid pandemic began, reversing a trend that had rates at a 23-year high. This more substantial cut contrasted with the more modest quarter-point decrease that some had anticipated. While lower borrowing costs can alleviate burdens on businesses and consumers, potentially mitigating job losses, they also carry the risk of stoking inflation, potentially eroding the Fed's efforts to control price increases.

Fed Chair Jerome Powell indicated that the central bank's focus is now shifting towards bolstering employment, in addition to managing inflation. Despite expressing confidence in the current state of the job market and the economy, he noted a weakening in the labor market's strength since the pandemic's onset. The Fed's action has been interpreted by some, like Ronald Temple of Lazard, as a proactive measure to safeguard against further labor market deterioration.

The stock market has experienced a rollercoaster ride in recent months, with significant fluctuations between sharp declines and record highs, reflecting investor concerns about the Fed's timing on rate cuts and the possibility of an economic downturn. Despite these concerns, Powell has cautioned against anticipating a consistent half-point reduction in rates, indicating that the Fed's latest economic projections include further cuts in 2024, revising upwards from the previous forecast of a single cut this year. The central bankers are also forecasting a rise in unemployment to 4.4% from August's 4.2% rate.

As the trading day concludes and the dust settles, the stock market levels may experience minor adjustments.