Futures Pointing To Sharply Higher Open On Wall Street

The major U.S. index futures are currently pointing to a sharply lower open on Thursday, with stocks likely to see an early rally after ending yesterday’s session moderately lower following late-day volatility.

The considerable upward momentum on Wall Street comes as traders continue to digest the Federal Reserve’s decision on Wednesday to slash interest rates by 50 basis points.

Fed officials also forecast continued rate cuts over the comings months and into next year, generating optimism the central bank will be able to engineer a soft landing for the economy.

Potentially adding to the buying interest, the Labor Department recently released a report showing first-time claims for U.S. unemployment benefits unexpectedly fell to a nearly four-month low in the week ended September 14th.

The report said initial jobless claims slid to 219,000, a decrease of 12,000 from the previous week’s revised level of 231,000.

Economists had expected jobless claims to come in unchanged compared to the 230,000 originally reported for the previous week.

With the unexpected decline, jobless claims fell to their lowest level since hitting 216,000 in the week ended May 18th.

Stocks saw considerable volatility late in the trading session on Wednesday following the Federal Reserve’s announcement of its decision to lower interest rates. The major averages showed wild swings back and forth across the unchanged line before eventually closing in negative territory.

The Dow and the S&P 500 reached new record intraday highs immediately following the Fed announcement but finished the day in the red.

The Dow fell 103.08 points or 0.3 percent to 41,503.10, the S&P 500 slipped 16.32 points or 0.3 percent to 5,618.26 and the Nasdaq dipped 54.76 points or 0.3 percent to 17,573.30.

The late-day volatility on Wall Street came after the Fed decided to lower interest rates for the first time in over four years, aggressively slashing rates by half a percentage point.

With the Fed saying officials have gained greater confidence inflation is moving sustainably toward its 2 percent target, the central bank lowered the target range for the federal funds rate by 50 basis points to 4.75 to 5.00 percent.

The Fed was almost universally expected to cut rates for the first time since March 2020, but there was some debate over whether it would lower rates by 25 or 50 basis points.

The decision to opt for the larger rate cut came as the Fed said the risks to achieving its employment and inflation goals are roughly in balance.

The economic projections provided by Fed officials at the meeting suggested the central bank would cut rates by another 50 basis points by the end of the year.

Fed officials also expect to continue lowering rates next year, with the projections indicating rates will be lower by another full percentage point by the end of 2025.

“The Fed front-loaded this rate cutting cycle with a jumbo 50 bps rate cut and signaled in their statement that they are focused squarely on the labor market, saying they are ‘strongly committed to supporting maximum employment,'” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

“We believe that the market will undergo some volatility as we get closer to the election,” he added. “However, lowering interest rates now – and telegraphing another 50 bps in cuts by the end of this year and a total of 150 bps more by the end of next year – should allow the market to hit all-time highs again by the end of this year, and more gains for next year.”

In U.S. economic news, a report released by the Commerce Department showed a substantial rebound by new residential construction in the U.S. in the month of August.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

However, gold stocks saw significant weakness as the price of the precious metal came under pressure in electronic trading, dragging the NYSE Arca Gold Bugs Index down by 1.4 percent.

A notable decrease by the price of crude oil also weighed on oil service stocks, as reflected by the 1.3 percent loss posted by the Philadelphia Oil Service Index.

Semiconductor, software and networking stocks also moved to the downside on the day, contributing to the dip by the tech-heavy Nasdaq.

Commodity, Currency Markets

Crude oil futures are climbing $0.70 to $71.61 a barrel after dipping $0.28 to $70.91 a barrel on Wednesday. Meanwhile, after inching up $6.20 to $2,598.60 an ounce in the previous session, gold futures are rising $11.90 to $2,610.50 an ounce.

On the currency front, the U.S. dollar is trading at 143.45 yen versus the 142.29 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1130 compared to yesterday’s $1.1119.

Asia

Asian stocks rose broadly on Thursday after the U.S. Federal Reserve announced a larger-than-usual 50 basis point reduction in borrowing costs and signaled further easing in the months ahead, reflecting its new focus on bolstering the job market.

The dollar bounced back and long-dated bond yields rose, while gold hovered near a record high. Oil prices rebounded despite lingering concerns over global demand.

China’s Shanghai Composite Index climbed 0.7 percent to 2,736.02, while Hong Kong’s Hang Seng Index surged 2.0 percent to close at 18,013.16.

The Hong Kong Monetary Authority today cut its base interest rate for the first time since 2020 after the Federal Reserve eased policy.

Japanese markets logged strong gains as the yen slumped against the dollar and investors braced for a Bank of Japan policy meeting on Friday. The central bank is expected to stand pat on rates, with attention likely to remain focused on Governor Ueda’s remarks.

The Nikkei 225 Index soared 2.1 percent to 37,155.33, with exporters such as automakers and electronics makers leading the surge. The broader Topix Index settled 2.0 percent higher at 2,616.87.

Seoul stocks edged up slightly, with the Kospi finishing up 0.2 percent at 2,580.80, led by automakers. Hyundai Motor surged 3.8 percent and its affiliate Kia Corp. advanced 3 percent.

Memory chipmaker SK Hynix plummeted 6.1 percent after Morgan Stanley sharply cut its target price on the stock, warning the DRAM and high-bandwidth memory (HBM) market would enter a downturn next year due to softening demand and oversupply. Samsung Electronics lost a little over 2 percent.

Australian markets hit a new high, with mining and energy stocks leading the surge following the FOMC’s big rate cut. The benchmark S&P/ASX 200 Index gained 0.6 percent to close at 8,191.90, while the broader All Ordinaries Index climbed 0.6 percent to 8,417.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index rose 0.6 percent to 12,665 after data showed the country’s economy shrank in the second quarter, leaving room for rate cuts.

Europe

European stocks have advanced on Thursday after the U.S. Federal Reserve slashed its key rate by 50 basis points and signaled further easing, raising hopes of a soft landing for the world’s largest economy.

The Bank of England decided to maintain its benchmark rate on Thursday after a quarter-point cut last month and also extended its bond reduction plan for another one year.

While the French CAC 40 Index has jumped by 2.0 percent, the German DAX Index is up by 1.7 percent and the U.K.’s FTSE 100 Index is up by 1.0 percent.

Higher base metal prices have boosted miners, with Anglo American, Antofagasta and Glencore moving sharply higher.

British clothing retailer Next has also shown a significant move to the upside after raising its annual profit forecast. Online grocer Ocado has also soared after upgrading its revenue guidance.

Close Brothers has also jumped after the merchant banking group agreed to sell its wealth management unit, Close Brothers Asset Management (CBAM), to a private equity firm.

Automakers Renault, Volkswagen and Mercedes Benz have also risen despite Europe’s new car registrations posting a steep decline in August.

New car sales decreased 18.3 percent on a yearly basis with negative results across all four major markets, largely due to the notable decrease in electric car sales, according to data from the European Automobile Manufacturers’ Association.

U.S. Economic News

First-time claims for U.S. unemployment benefits unexpectedly fell to a nearly four-month low in the week ended September 14th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims slid to 219,000, a decrease of 12,000 from the previous week’s revised level of 231,000.

Economists had expected jobless claims to come in unchanged compared to the 230,000 originally reported for the previous week.

With the unexpected decline, jobless claims fell to their lowest level since hitting 216,000 in the week ended May 18th.

A separate report released by the Federal Reserve Bank of Philadelphia showed its reading on Philadelphia-area manufacturing activity returned to positive territory in the month of September.

The Philly Fed said its diffusion index for current general activity jumped to a positive 1.7 in September from a negative 7.0 in August, with a positive reading indicating growth. Economists had expected the index to surge to a positive 2.0.

Looking ahead, the Philly Fed said firms continue to expect growth over the next six months, with expectations more widespread this month.

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of August. Existing home sales are expected to decrease to an annual rate of 3.90 million in August after jumping to a rate of 3.95 million in July.

The Conference Board is also due to release its report on leading economic indicators in the month of August at 10 am ET. The leading economic index is expected to dip by 0.3 percent in August after falling by 0.6 percent in July.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auctions of two-year, five-year and seven-year notes.