U.S. stock index futures rose sharply on Thursday, particularly those tied to the Nasdaq, which climbed nearly 2% following the Federal Reserve’s decision to initiate its easing cycle with a 50 basis point rate cut. This move is expected to support a soft landing for the U.S. economy.
Rate-sensitive growth stocks led the charge in premarket trading, with Microsoft, Meta, and Alphabet each gaining over 1.5%. Chipmakers also saw significant increases, with Nvidia rising 2.8%, Advanced Micro Devices up 3%, and Broadcom gaining 3.4%. Futures for the domestically-focused Russell 2000 index surged 2.5%, reaching its highest level since July 31.
The lower interest rate environment is anticipated to reduce operating costs and enhance profits for companies reliant on credit. As of 4:59 a.m. ET, Dow E-minis were up 398 points (0.96%), S&P 500 E-minis rose by 76.25 points (1.34%), and Nasdaq 100 E-minis increased by 355.75 points (1.82%).
Following its substantial decision, the Fed emphasized that the rate cut was not a reaction to an emergency situation. The central bank’s projections suggest a “Goldilocks” scenario for the economy, characterized by steady growth along with low inflation and unemployment.
Traders are now estimating a 64.2% likelihood that the Fed will cut interest rates by 25 basis points at its November meeting, according to the CME Group’s FedWatch tool. Predictions indicate a total reduction of 72 basis points by the end of the year, based on LSEG data.
On the economic front, investors will be closely watching weekly jobless claims and existing home sales data for August. While the market’s reaction to the Fed’s decision was subdued—leading to slight declines in all three major indexes in the previous session—historical data from Evercore ISI shows that the S&P 500 has averaged a 14% gain in the six months following the first cut in a rate-cutting cycle since 1970.
