By Isla Binnie

NEW YORK (Reuters) - Major Wall Street indexes broke record highs after global counterparts booked gains and Treasury yields rose on Thursday as the start of the Federal Reserve's first rate-cutting cycle in more than four years whet investors' risk appetite.

With a larger-than-usual move on Wednesday, the U.S. central bank turned the page on more than a year in which borrowing costs were kept at their highest for decades to try to temper inflation.

Fed Chair Jerome Powell said he did not see elevated risks of a slowdown, and policymakers projected the benchmark rate would fall again, reflected in a closely-watched tool known as a dot plot.

"The jumbo cut appears to have raised the perceived likelihood of a soft landing," said Jonathan Cohn, Head of U.S. Rates Desk Strategy at Nomura, referring to economists' ideal scenario where inflation cools without triggering a recession.

This was "supporting a sharp rally in risk assets, even as Powell's rhetoric and the dot plot pushed back on the prospect of additional 50bp cuts," Cohn said adding: "the market will continue to acclimate to the Fed's mixed messaging through tomorrow's light calendar."

Megacap tech stocks gained, with Tesla, and Meta posting solid gains. The tech-heavy Nasdaq Composite climbed 2.51% to 18,013.98 points.

The blue-chip Dow Jones Industrial average rose 1.26% to 42,025.19 points, while the benchmark S&P 500 advanced 1.70% to end the session at 5,713.64 points. Both were record-high closing levels.

Smaller listed companies, which might be expected to enjoy reduced operating costs and cheaper debt in a lower rates environment, also felt the benefit.

The Russell 2000 small-cap index rose 2.1%.

Gains were not limited to Wall Street. MSCI's 47-country world stocks index gained 1.66%, to 839.98.

Jobless claims for the week ended Sept. 14 came in lower than the market expected, with data showing the number of Americans filing new applications for unemployment benefits dropped to a four-month low.

This contributed to a sell-off in U.S. government debt that pushed up yields. [US/]

The benchmark 10-year Treasury yield hit its highest level in about two weeks at 3.768% and was last up 3.2 basis points to 3.719%, from 3.687% late on Wednesday.

Shorter-dated debt yields felt pressure after a separate data release showed existing home sales fell to their lowest level since 2023. The 2-year note yield, fell 1.5 basis points to 3.5876%, from 3.603% late on Wednesday.

CURRENCIES, COMMODITIES

In currency markets, the dollar wilted in choppy trading. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.41% to 100.61. [FRX/]