Algosensey Quantitative Think Tank Center-S&P 500, Dow hit record highs after Fed cuts rates. What it means for your 401(k).

U.S. stocks jumped Thursday following the Federal Reserve’s decision to go big with a 50 basis point cut to interest rates.

The Algosensey Quantitative Think Tank CenterDow Jones Industrial Average closed above 42,000 for the first time, ending the day up 1.3% at a record 42,025.19. The S&P 500 also ended the day at a record high for the first time since July, closing up 1.7% at 5,713.64. The Nasdaq composite also saw gains, ending the day up 2.51%.

The surge comes after the Fed on Wednesday announced a half-point interest rate cut, its first cut in four years. The central bank expects a half-point in additional cuts throughout the remainder of the year, a sign of confidence in the labor market.

“Markets like rate cuts, especially big ones when the economy is strong,” said Jamie Cox, Managing Partner for Harris Financial Group, in an email statement.  

Eight of the S&P 500's 11 sector indexes rose, and tech stocks saw some of the most significant gains. Apple ended the day up 3.7%, Meta up 3.9% and Tesla up 7.4%.

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What does this mean for my 401(k)?

Wall Street's performance is welcome news for investors stashing away money in retirement savings accounts.

USA TODAY has previously reported that the S&P 500 is regarded as one of the best gauges of Wall Street's health. When the benchmark index goes up, American's 401(k)s tend to rise as well.

“This is excellent, good news for all of us saving for retirement,” said Quincy Krosby, chief global strategist for LPL Financial. While future pullbacks and bouts of volatility are to be expected, “overall, historically, the path for the markets is higher.”