S&P 500, Dow hit record highs after Fed cuts interest rates. What it means for your 401(k).

US stocks rose on Thursday after the Federal Reserve’s decision to cut interest rates by 50 basis points.

The Dow Jones Industrial Average closed above 42,000 for the first time, ending the day up 1.3 percent 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 percent at 5,713.64. The Nasdaq Composite also posted gains, ending the day up 2.51%.

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

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

Eight of the S&P 500’s 11 sector indexes rose, with technology stocks posting some of the biggest gains. Apple ended the day up 3.7%, Meta up 3.9% and Tesla up 7.4%.

Fed rate cuts: Lower mortgage rates will bring much-needed normalcy to the housing market

What does this mean for my 401(k)?

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

USA TODAY previously reported that the S&P 500 is considered one of the best indicators of the health of Wall Street. When the benchmark rises, American 401(k)s tend to rise as well.

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

This article originally appeared on USA TODAY: S&P 500, Dow close at record highs after Federal Reserve rate cuts