Stock Market Today: Dow Set to Open Sharply Higher After Fed Rate Cut; Nasdaq, S&P 500 Surge; Treasury Yields Fall

The Federal Reserve’s decision to slash interest rates by a jumbo 50 basis points signaled to investors that the central bank is now prioritizing propping up the economy rather than reining in inflation. That’s bullish for stocks, judging by premarket action.

Tech was leading the rally, with contracts tied to the Nasdaq 100 jumping 1.8%. Dow Jones Industrial Average futures climbed 400 points, or 1%, while the futures for the benchmark S&P 500 rose 1.3%, putting the index on course to test record highs.

The Fed lowering borrowing costs for the first time since the early days of the pandemic was always likely to boost equities, but its decision to cut rates by half a point has shored up investors’ belief that the U.S. economy will be able to dodge a recession. It’s also a sign that policymakers are fretting less about inflation, even though their preferred personal consumption expenditures gauge of price rises isn’t expected to cool to 2% until 2026.

“This is good news for the value trade in the US, as this move is supportive of economic growth, and it could prolong the economic cycle,” Kathleen Brooks, research director at the online brokerage firm XTB, said.

More interest rate news will come Thursday from across the Atlantic, with the Bank of England set to announce a policy decision of its own–although it’s expected to keep borrowing costs unchanged, having cut at the start of last month.

Package deliverer FedEx and homebuilder Lennar are both set to report quarterly results after the closing bell, and because their earnings are closely linked to consumer spending, that could give investors a sense of how the economy is holding up.

Oil prices rose after the Fed’s outsize rate cut. The Brent international benchmark climbed 1.1% to $74.43 a barrel, while U.S. West Texas Intermediate crude prices rose 1% to $71.59 a barrel.

Bond yields were up over the past 24 hours. The yield on the 10-year U.S. Treasury note was at 3.699%, while 2-year notes were yielding 3.594%.

The Federal Reserve’s decision to cut interest rates by half a percentage point has sparked a broad rally in stock prices, but it looks like one sector is set to outperform the rest.

Futures for the tech-heavy Nasdaq 100 surged 2.1%. If those gains hold until the opening bell, the index would be trading just shy of 20,000 points, having last hit that level in mid-July.

Roundhill’s Magnificent Seven exchange-traded fund, which tracks shares in the seven blue-chip megacaps that accounted for the bulk of the benchmark S&P 500’s gains last year, was up 2.3% ahead of the opening bell.

Chip designer Nvidia and electric car maker Tesla were the two biggest winners from the group, with each jumping more than 3% in premarket trading.