Dow rises 500 points as Fed-backed stocks target records

US stock prices rose on Thursday amid growing confidence that the Federal Reserve's massive interest rate cut would bring a “soft landing” to the US economy.

The S&P 500 (^GSPC) rose about 1.7%, while the Dow Jones Industrial Average (^IXIC) gained more than 500 points, both trading near record highs. The tech-heavy Nasdaq Composite (^IXIC) led the gains with a 2.2% gain.

Stocks are rising as investors take a closer look at the Fed's decision to begin its new interest rate cycle with a 50 basis point cut. Stocks fluctuated after Wednesday's policy announcement before closing in the red.

Wall Street has taken note of Chairman Jerome Powell's message that a deep cut in a relatively strong economy will ultimately avert the risk of recession – and that this is a sign of confidence and not panic in the current situation.

Bank of America now expects the Fed to cut interest rates by 0.75 percent by the end of the year. Previously, it had only forecast 0.50 percent. In comparison, the central bank's “dot plot” suggests that policymakers expect a cut of half a percentage point.

Read more: What the Fed's interest rate cut means for bank accounts, CDs, loans and credit cards

Rate-sensitive growth stocks rose in premarket trading, with the big technology stocks that fueled this year's rally making gains. Alphabet (GOOG), Microsoft (MSFT) and Meta (META) all gained about 2%, while Apple (AAPL) gained over 3%. Tesla (TSLA) and Nvidia (NVDA) rose about 4%.

With the Fed completing its course corrections, some market participants are again watching the data releases as they brace for potential volatility. A weekly report from the Labor Department on initial jobless claims on Thursday morning showed a decline to the lowest level in four months. The figure for the week ending September 19 was 219,000, while the previous week's total was revised up by 1,000 to 231,000.