US Stock Futures Rise After Fed’s Hawkish Rate Cut
US stock futures climbed in premarket trading on Thursday, rebounding from the previous session’s decline following a less-than-expected dovish rate cut from the Federal Reserve. All major indices futures showed gains, with Nasdaq 100 up 0.28%, S&P 500 up 0.40%, Dow Jones up 0.37%, and Russell 2000 up 0.39%. The 10-year and two-year Treasury notes yielded 4.54% and 4.32%, respectively.
Fed’s Rate Cut and Market Reaction
The Federal Reserve reduced interest rates by 0.25% to a range of 4.25%-4.5%, as anticipated. However, the revised economic projections indicated only two possible rate cuts in 2025, fewer than the market’s expectation of three. This hawkish outlook, despite the rate cut, led to Wednesday’s market sell-off. The probability of no interest rate change in the upcoming January 31, 2025, decision stood at 91.4% according to CME Group’s FedWatch tool. This unexpected shift in the Fed’s stance significantly impacted investor sentiment.
Economic Data and Market Outlook
GDP revisions for the third quarter are expected to provide further insight into the economy’s health. Investors await Friday’s release of the November personal consumption expenditures (PCE) inflation index, another key data point that could influence future market movements. Several inflation indicators suggest a potential acceleration in price increases in November.
Wednesday’s Market Decline and Analyst Insights
US stocks closed lower on Wednesday, with the Dow Jones experiencing its tenth consecutive day of decline. The current account deficit widened to $310.9 billion in the third quarter and housing starts also declined. Analysts offered diverse perspectives on the market’s recent performance. Some viewed the downturn as a healthy correction after an overly optimistic market reaction, while others pointed to concerns about the Federal Reserve’s cautious approach to future rate cuts and the potential impact of incoming administration policies. The impact of potential tariffs and their effect on inflation was also discussed.
Upcoming Economic Data Releases
Several key economic indicators are scheduled for release this week. Thursday will see the release of initial jobless claims, GDP revisions, and Philadelphia Fed manufacturing survey data. Friday’s releases include personal income and spending data, and the core and headline PCE index data, as well as consumer sentiment data. Earnings reports from companies such as Carnival Corporation and Winnebago Industries are also anticipated.
Stocks in Focus
Several companies saw significant pre-market stock movement. Accenture saw gains ahead of its earnings call. Micron Technology declined after reporting better-than-expected earnings but missed sales expectations. Nike saw a slight uptick in premarket trading. Lennar Corp. fell significantly after reporting weaker-than-expected fourth-quarter financial results. Sangamo Therapeutics and KULR Technology Group both experienced substantial gains due to positive developments in their respective sectors. Mesoblast Ltd rose significantly on FDA approval.
Commodities, Bonds, and Global Markets
Crude oil futures declined, gold also fell, and the dollar index weakened slightly. Asian and most European markets experienced declines, while China’s CSI 300 index saw marginal gains.
Conclusion
The Federal Reserve’s rate cut, along with revised economic projections and upcoming economic data releases, will continue to shape market sentiment and drive investor decisions in the coming days. The interplay between inflation concerns, potential policy changes, and corporate earnings will play a crucial role in determining the overall trajectory of the markets.
