U.S. stock index futures soared on Thursday, particularly those tracking the Nasdaq, which jumped nearly 2% following the Federal Reserve’s decision to initiate its easing cycle with a half-percentage-point rate cut. This move is seen as a key factor in promoting a soft landing for the U.S. economy.
Rate-sensitive growth stocks, including Microsoft, Meta, and Alphabet, rose by over 1.5% in premarket trading, continuing their strong performance from earlier this year.
Chip stocks also experienced significant gains, with Nvidia up 2.8%, Advanced Micro Devices increasing by 3%, and Broadcom rising 3.4%. Meanwhile, futures for the domestically-focused Russell 2000 index surged 2.5%, reaching its highest level since July 31.
A lower interest rate environment may signal cheaper operating costs and increased profitability for companies reliant on credit. As of 04:59 a.m. ET, Dow E-minis had risen by 398 points, or 0.96%; S&P 500 E-minis were up 76.25 points, or 1.34%; and Nasdaq 100 E-minis had gained 355.75 points, or 1.82%.
Following its decisive action on Thursday, the Fed emphasized that the rate cut was not an emergency measure. The central bank’s projections suggest conditions conducive to a “Goldilocks” scenario—characterized by steady growth with low inflation and unemployment.
Market participants now estimate a 64.2% likelihood that the Fed will lower interest rates by 25 basis points during its November meeting, according to the CME Group’s FedWatch tool. Analysts expect the central bank to reduce rates by a total of 72 basis points by the end of the year, based on LSEG data.
Investors are also focused on upcoming economic data, including weekly jobless claims and existing home sales for August.
Despite the Fed’s announcement, market reactions were initially muted, with all three major indexes closing slightly lower in the previous session. However, historical data from Evercore ISI indicates that the S&P 500 has averaged a 14% gain in the six months following the first rate cut in a cycle, dating back to 1970.
Traditionally, September has been a challenging month for U.S. equities, with the S&P 500 averaging a loss of 1.2% since 1928. Although the index has recorded losses this month, it remains near record highs, while the Dow is just short of its own milestone.
In the banking sector, JPMorgan Chase & Co. rose 1.1%, Bank of America increased by 1.6%, and Wells Fargo gained 1.5% after these institutions lowered their respective prime rates. Citigroup also climbed 1.5% following a reduction in its base lending rate. Dell Technologies saw a 2.8% increase after announcing a quarterly cash dividend.
