S&P sets new record as stocks rally on Fed cut hopes

Stocks rallied Thursday and drove the S&P 500 index to a new record high as investors cheered the increasing odds of a Federal Reserve rate cut.

The S&P 500 rose 0.95 percent Thursday, rising 27.7 points to a record close of 2,954. 

The Dow Jones Industrial Average rose 0.94 percent to close with a gain of 249 points while the Nasdaq composite rose 64 points for a gain of 0.80 percent.{mosads}

The rally comes a day after the Fed opened the door to cutting interest rates amid rising trade tensions, fading global economic growth and persistently low inflation.

Seven members of the rate-setting Federal Open Market Committee (FOMC) on Wednesday projected the Fed will cut rates twice by the end of 2019, while one expected a single cut. Of the nine remaining FOMC members, eight expected the Fed to hold rates steady through the year, while one member projected another rate hike.

All but one of the 12 FOMC members with votes supported holding rates steady until their next meeting.

“There was not much support for cutting rates now, at this meeting,” Federal Reserve Chairman Jerome Powell said Wednesday, adding that of the FOMC members who projected cuts, “all of those but apparently one felt that it would be better to see more before moving.”

Stocks gave back some of their gains just before 1 p.m. Thursday after President Trump said the public will “soon find out” if he will retaliate against Iran after the country shot down a U.S. drone flying roughly 20 miles off its coast on the Strait of Hormuz.

Even so, Trump suggested the attack on the drone could have been a mistake and appeared hesitant to escalate the issue.

“I have a feeling that it was a mistake made by somebody who shouldn’t have been doing something that they did,” Trump told reporters at the White House. “I find it hard to believe it was intentional, if you want to know the truth.”

Updated at 4:18 p.m.