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U.S. stocks surge as S&P 500 hits record high

The S&P 500 stock index closed at an all-time high Thursday, following the Federal Reserve's announcement on Wednesday that it would consider cutting interest rates to keep the economy in expansion mode.

The S&P 500 added 28 points, or nearly 1%, to close at 2,954 -- that topped the previous high of 2,946 on April 30. The Dow added 249 points, rising 1% to 26,753, marking its highest trading level since its Oct. 3, 2018, close of 26,828. The Nasdaq added 64 points, climbing 0.8% to 8,051. That's just 0.7% below its May 3 all-time high of 8,164.

Stocks are rising amid signs of an economic slowdown. IHS Markit forecasts U.S. GDP growth of 1.8% for the second half of 2019 -- that would be down sharply from growth of 3.1% in the first three months of the year and 2.9% for all of 2018. Declining economic activity, muted inflation and trade tensions with China could also spur the Fed to dial back rates, according to economists.  

Federal Reserve Chairman Jerome Powell on Wednesday said the central bank would hold interest rates steady but signaled it's willing to lower them later this year if trade tensions and the global economy worsen. The Fed's current benchmark interest rate is set at a range between 2.25% and 2.5%.

"The Fed left the funds rate unchanged but delivered a dovish message, even relative to market expectations," Goldman Sachs analysts said in a note assessing the Fed's policy statement on Wednesday. 

With investors counting on the Fed to lower borrowing costs sooner rather than later, Morgan Stanley analysts predicted in a report on Thursday that policymakers will cut rates by a half-percentage point in July. The Fed hasn't pared its benchmark rate since 2008.