Premarket: S&P 500, Nasdaq futures hit record high after Fed points to further rate cuts

 U.S. stock index futures gained on Thursday, with those tied to the S&P 500 and the Nasdaq at record highs a day after the U.S. central bank delivered a quarter-point interest rate cut, its first this year.

After the highly expected cut, Federal Reserve Chair Jerome Powell said that the softening jobs market was a priority for the central bank, indicating more reductions could follow at its October and December meetings.

Investors are pricing in 44.6 basis points in cuts by end-2025, implying nearly two quarter-point cuts, data compiled by LSEG showed.

Powell, however, tempered aggressive easing expectations of market participants, saying the cut was a risk-management move and the central bank did not need to move quickly on rates, leading the S&P 500 and the Nasdaq to close lower on Wednesday.

AI chip giant Nvidia also weighed on Wednesday after a report said Chinese tech firms might stop buying its chips. The stock was 2.3 per cent higher in Thursday’s premarket trading.

Futures tied to the small-cap Russell 2000 index gained 1.5 per cent, as these companies are likely to perform better in a low interest-rate environment.

“Powell referred to this as a ‘risk management’ cut, emphasizing this move as a form of insurance against growing signs of labor market weakness,” said Jean Boivin, head of the BlackRock Investment Institute.

“Any future policy easing would be conditional on data supporting that a soft labor market is real and persistent.”

At 5:30 a.m. ET, Dow E-minis were up 321 points, or 0.69 per cent, S&P 500 E-minis were up 57.25 points, or 0.86 per cent and Nasdaq 100 E-minis were up 255.25 points, or 1.05 per cent.

Concerns around the independence of the Fed also seemed to fade as attempts by President Donald Trump’s administration to fire Governor Lisa Cook were unsuccessful and Governor Stephen Miran, sworn in on Tuesday, was the only dissenter of the move, calling for a bigger 50 bps cut.

The Fed decision is expected to add to Wall Street’s recent rally, where the S&P 500 and the Nasdaq hit intraday record highs in multiple sessions, boosted by monetary policy easing hopes and a revival of AI-linked stock.

The three indexes have gained so far in September – a month deemed bad for U.S. equities historically – where the S&P 500 has shed 1.4 per cent on average since 2000, data compiled by LSEG showed.

A weekly reading of jobless claims is due before markets open.

Among stocks, CrowdStrike gained 4.9 per cent after at least two brokerages raised their price target on the stock.

Nucor slipped 3.8 per cent after the steel company said it expected third-quarter profit to decrease across all its three operating segments.

Nike was 1.9 per cent higher after RBC upgraded the sportswear retailer to “outperform” from “sector perform.” 

Stocks and the dollar nudged higher on Thursday after the U.S. Federal Reserve’s first interest rate cut of the year, while French politics kept its markets jittery and the pound held its ground ahead of a Bank of England rate decision.

Asia had rallied overnight too. Chinese stocks hit a 10-year high as local chipmakers cheered reports of U.S. giant Nvidia being banned there, while South Korea, Taiwan and Japan’s Nikkei all ended more than 1 per cent higher.

There may have also been an element of relief to see the dollar nearly 0.2 per cent higher in the currency market following a plunge to a 3-1/2-year low this week that has left non-U.S. exporting firms grinding their teeth.

Europe’s traders kept the euro broadly steady at $1.1825 and sterling was an unchanged $1.36 with the BoE widely anticipated to keep UK rates at 4 per cent later.

Most interest will be on whether the British central bank slows the 100 billion-pound-a-year pace at which it reduces its government bond holdings following the recent increase in volatility in UK bond markets.

A Reuters poll showed economists expect the Monetary Policy Committee to slow the pace to a median 67.5 billion pounds ($92.2 billion) – a bigger drop than the fall to 72 billion pounds in the BoE’s own poll in August.

The Norwegian crown softened a touch in response to an already announced 25 basis point rate cut from its central bank early. It was still close to a near-three high against the dollar and around two-month high against the euro .

The Chinese yuan had ticked higher meanwhile after China’s central bank left the borrowing cost of its seven-day reverse repurchase agreements unchanged overnight, while New Zealand’s dollar tumbled after data showed the country’s economy shrinking far more than expected.

The Australian dollar also slipped 0.4 per cent from an almost one-year high reached on Wednesday, after the release of weaker-than-expected labour market data for August.

Bond markets were still rallying though with the yield on benchmark 10-year Treasury notes dropping to 4.06 per cent and the two-year yield, which rises with traders’ expectations of higher Fed funds rates, at 3.53 per cent.

Germany’s 10-year yield, the benchmark for the euro zone bloc, also fell 0.5 basis points to 2.67 per cent, though focus was also on France’s political strains again as its bond yields shifted above Italy’s.

In the commodity markets, oil prices dipped, with Brent crude last down 0.2 per cent at $67.87 per barrel, while safe-haven gold nudged 0.2 per cent higher to $3,665 per ounce.

Reuters