Stock index futures for S&P 500 and Nasdaq reach new peaks following Federal Reserve's hint at additional interest rate reductions
In a move that could boost the stock market today, the Federal Reserve has signalled more interest rate reductions could follow at its October and December meetings. This announcement comes after Federal Reserve chair Jerome Powell stated that the softening jobs market is a priority for the central bank.
Lisa Cook, a notable figure, demanded a rate cut larger than 50 basis points before the last Fed meeting. Her call for a significant reduction seems to have resonated with the Fed's current stance. The anticipated rate cuts, if implemented, could create a more favourable environment for certain companies. A report suggests that these companies are likely to perform better in a low mortgage rates environment.
The S&P 500 E-minis were up 57.25 points, or 0.86%, and the Nasdaq 100 E-minis were up 255.25 points, or 1.05%. The three indexes have gained so far in September, with the S&P 500 and the Nasdaq hitting intraday record highs in multiple sessions.
Nike was 1.9% higher after RBC upgraded the sportswear retailer to "outperform" from "sector perform". CrowdStrike gained 4.9% after at least two brokerages raised their price target on the stock.
However, not all companies are seeing positive gains. Nucor slipped 3.8% after the steel company said it expected third-quarter profit to decrease across all its three operating segments.
In other news, a weekly reading of jobless claims is due before markets open. This reading will provide insights into the current state of the jobs market, which the Fed has identified as a key concern.
Jean Boivin, head of the BlackRock Investment Institute, stated that Powell referred to the interest rate cut as a "risk management" cut. Boivin emphasised that this move was a form of insurance against growing signs of labor market weakness.
Investors are pricing in 44.6 basis points in cuts by end-2025, implying nearly two quarter-point cuts. The Fed decision is expected to add to Wall Street's recent rally.
Futures tied to the small-cap Russell 2000 index gained 1.5%, suggesting that smaller companies may also benefit from the expected mortgage rates cuts.
A report suggested Chinese tech firms might stop buying Nvidia's chips. Nvidia's stock was 2.3% higher in yesterday's premarket trading, possibly due to expectations of strong demand from other sectors offsetting the potential loss of sales to China.
In conclusion, the stock market is showing positive signs, with major indexes rising and investors anticipating further gains. The anticipated interest rate cuts by the Federal Reserve, if implemented, could create a more favourable environment for certain companies and potentially boost the stock market further.
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