Written by Johann M Cherian and Purvi Agarwal
(Reuters) – U.S. stock index futures jumped on Thursday, with those linked to the tech-heavy Nasdaq rising 2% after the Federal Reserve began its tapering cycle by cutting interest rates by 50 basis points, helping to ease the decline. the largest economy in the world.
Growth stocks that have led much of this year’s rally such as Microsoft (NASDAQ: ), Meta (NASDAQ: ) and Alphabet (NASDAQ: ) advanced 2% in premarket trading.
Semiconductor stocks also rose. Nvidia (NASDAQ: ) rose 3.2%, while Advanced Micro Devices (NASDAQ: ) and Broadcom (NASDAQ: ) gained 3.3% for the broader market.
Futures for the domestically-focused index rose 3%.
A low interest rate environment can mean opportunities for lower operating costs and higher profits for companies that rely on debt.
At 7:17 am ET, the Dow E-minis were up 456 points, or 1.1%, the E-minis were up 91.25 points, or 1.61% and the E-minis were up 91.25 points, or 1.61% -404.75, or 2.07%.
After presenting its main decision on Thursday, the Fed confirmed that it was not an urgent response and the projections expressed by analysts that indicate the economic conditions to reach the state of goldilocks, where growth is stable and inflation and unemployment remain low.
“The Fed took insurance against a downturn in the labor market. Chairman (Jerome) Powell emphasized that there are no signs of an imminent collapse in what he described as a ‘strong economy’,” said Ronald Temple, chief market strategist at Lazard. (NYSE:).
Traders now see a 67% chance the central bank will cut interest rates by 25 basis points at its November meeting, according to CME Group’s (NASDAQ:) FedWatch tool.
BofA Global Research now expects a rate cut of 75 bps by the end of this year, compared to an earlier forecast of 50 bps. Citigroup revised its expectations for a rate cut in December to a smaller 25 bps, down from a forecast for a bigger move.
Goldman Sachs now expects sequential cuts of 25 bps from November 2024 to June 2025.
Market reaction after the decision was muted, with all three indices closing slightly lower in the previous session.
However, data going back to 1970 from Evercore ISI showed that the S&P 500 posted an average return of 14% in the six months following the first tapering of the rate-cutting cycle.
September has typically been a disappointing month for US stocks with the S&P 500 posting an average loss of 1.2% since 1928.
The benchmark index has pared losses so far this month but is near record highs, and the blue-chip Dow is just short of its historic high.
On the data front, weekly jobless claims and August home sales are on investors’ radar.
JPMorgan Chase & Co (NYSE: ) added 1.1%, Bank of America rose 1.7% and Wells Fargo advanced 1.8% after major banks cut their key rates. Citigroup also rose 1.9% after cutting its benchmark lending rate.
Progyny (NASDAQ: ) was among the few stocks that traded the least. A reproductive benefits management company fell 26% after a key customer notified the company that it had chosen to exercise a 90-day option to terminate its services agreement.
