S&P 500 Futures Surge as Dow Braces for Record Highs on Fed’s Rate-Cut Optimism

U.S. stock index futures experienced early gains on Thursday as investors continued to celebrate an unexpected dovish policy shift by the Federal Reserve.

Here’s the latest on stock-index futures trading:

  • S&P 500 futures (ES00) increased by 0.2% or 10 points to reach 4771.
  • Dow Jones Industrial Average futures (YM00) rose by 0.2% or 75 points, reaching 37563.
  • Nasdaq 100 futures (NQ00) saw a slight decrease of 0.4% or 61 points, bringing the index to 16838.

Wednesday’s market performance showed the Dow Jones Industrial Average rising by 1.4% to 37090, the S&P 500 increasing by 1.37% to 4707, and the Nasdaq Composite gaining 1.38% to 14734.

Key factors driving the market:

Investor sentiment remained positive following the surprise announcement from the U.S. central bank, signaling the end of its interest rate hike cycle and considering a 75 basis points rate cut in 2024.

The Bank of England and the European Central Bank are anticipated to maintain their main interest rates at 5.25% and 4%, respectively.

Expectations of lower U.S. borrowing costs in the coming year have boosted both equities and bonds, with the Dow Jones Industrial Average reaching an all-time high and the 10-year Treasury yield dropping to its lowest level since early August.

Stephen Innes, managing partner at SPI Asset Management, noted the harmonious resonance of this unexpected shift in global financial markets.

Investor optimism continued on Thursday, with 10-year Treasury yields dropping to 3.95%, and stock-index futures extending their rally.

The Dow was poised to set a new record, with Apple shares contributing to the momentum.

The S&P 500, up 22.6% in 2023, was on track to open only about 2% below its record. The S&P 500 Equal Weight Index also reached its highest level in 21 months.

Despite the positive trends, some analysts cautioned about potential overconfidence and a short-term overextension of the rally.

The CBOE VIX index, measuring expected S&P 500 volatility, was at its lowest in about four years, and the S&P 500’s 14-day relative strength index closed at 78.2, above the overbought threshold of 70.

Mark Newton, head of technical strategy at Fundstrat, highlighted the positive aspects but expressed concerns about elevated RSI readings and an unchanged risk/reward scenario after a roughly 13% rally in the last seven weeks.

Economic updates scheduled for Thursday include weekly jobless claims, November retail sales, and November import prices at 8:30 a.m. Eastern. Business inventories for November will be released at 10 a.m.

Costco and Lennar will release their results after the closing bell.

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