"Recalibration" Interest rate cut triggers a stock market frenzy, Dow Jones Industrial Average breaks through the 42,000 mark for the first time

The Federal Reserve announced a significant 50 basis point rate cut in its September rate decision, describing this rate cut as a "re-calibration" of its monetary policy, which led to a surge in the stock market, overshadowing concerns about a "recession."

According to the financial news app Smart Finance, on Thursday, the U.S. stock market surged, with the Dow Jones Industrial Average breaking through the 42,000-point mark for the first time, rising by 1.26%, and the S&P 500 index also rising by 1.70%, reaching a historic high.

Powell explained at a press conference on Wednesday, "We know it's time to recalibrate our policy to better fit the current situation. Considering that inflation and employment levels are moving towards more sustainable levels, the risk balance has become more balanced." Despite a market pullback after Powell's speech on Wednesday, the market quickly rebounded on Thursday.

The Fed's decision has drawn attention from analysts and commentators, with "re-calibration" becoming the focus. Many analysts believe that this shift to a neutral stance was the main driving force behind the global stock market rally on Thursday.

L. Thomas Block, Washington policy strategist at Fundstrat Research, pointed out that Powell's "re-calibration" seemed to be the keyword of the day.

While some market participants held a pessimistic view after Powell's press conference on Wednesday, the Fed chairman's policy shift inspired the bulls. Jose Torres, senior economist at Interactive Brokers, stated in a report that since the global financial crisis, the Fed has undoubtedly been a "strong ally" of bullish investors, stabilizing financial market volatility through its communication and driving asset prices (such as housing, stocks, and bonds) further up.

Jim Baird, Chief Investment Officer at Plante Moran Financial Advisors, commented in an email that Powell's wording and tone emphasized that this decision reflects the Fed's reassessment of the economic situation. This is also reflected in the Fed's updated economic forecasts, with inflation falling faster than expected and the unemployment rate rising more than the Fed's June forecast.

Baird added, "It remains to be seen whether the Fed can time and execute its policy smoothly, but the signal conveyed by policymakers indicates that the path of interest rates is not set in stone, which is an important signal for the market."

Nicholas Colas, co-founder of DataTrek Research, stated that Powell mentioned the term "re-calibration" multiple times in his speech that day and successfully conveyed a reasonable viewpoint to investors that this significant rate cut is an adjustment in the cycle rather than a precursor to an economic recession.

Colas further wrote, "Powell's 'slow and steady' pace of rate cuts may disappoint some, but it dispels concerns that a 50 basis point rate cut only applies to a rapid deterioration in the economy. From this perspective, he achieved the expected goal at his press conference on Wednesday."