Stock Market Today: Dow futures eye record high after Fed’s big rate cut

U.S. stock index futures are sharply higher on Thursday as global investors cheer the Federal Reserve’s 50 basis-point interest rate cut.

As MarketWatch pointed out on Wednesday, an unusual divide had emerged ahead of the cut. Economists had largely expected the central bank to cut 25 points, while Fed funds futures traders saw a higher likelihood of 50 points.

As it turns out, financial markets were right, but one Wall Street economist also managed to nail the call: JPMorgan Chase & Co.’s Michael Feroli.

Feroli, the bank’s chief U.S. economist, now expects the Fed will continue to lower interest rates more quickly than the central bank’s official forecasts — known as the “dot plot” — suggest, although the pace of the monetary easing going forward will largely depend on whether the labor market continues to cool.

“In terms of our outlook, we are still expecting a faster pace of rate normalization than the median dot. Our expectation for a 50bp cut at the next meeting in early November is contingent on further softening in the two jobs reports between now and then. More benign labor data would, instead, seal the case for the FOMC’s goldilocks scenario of 25bp eases per meeting over the remainder of the year,” Feroli said in a report shared with MarketWatch after the Fed decision.

To be sure, a top interest-rate trader at Citigroup also nailed the 50 basis point call, as did a team of macro strategists at MUFG. Nomura’s Charlie McElligott also correctly anticipated a 50 basis point cut in commentary shared with MarketWatch last week.

Darden Restaurants Inc.’s stock rose 11% premarket Thursday, after the parent to Olive Garden, LongHorn Steakhouse and other restaurant chains’ fiscal first-quarter earnings fell short of estimates, but it backed guidance for the full year.

Chief Financial Officer Raj Vennam said a “significant” slowing of traffic in July was behind the miss. Many restaurant operators and retailers have experienced slumps in demand this year against a background of high inflation that has consumers curbing their spending.

“Following the softness in July, our sales trend has continued to improve,” he said in prepared remarks. “Considering this recovery as well as the planned initiatives to support the remainder of the fiscal year, we are reiterating our guidance for fiscal 2025.”

Amazon.com Inc. is raising pay for fulfillment and transportation workers by $1.50 an hour starting this month, raising the base wage to more than $22 an hour, or $3,000 a year on average for full-time employees who work a 40-hour week.

The e-commerce and cloud giant announced the move in blog post on Wednesday, in which it said it’s also adding Prime membership to its benefits package starting early next year.

“Hourly team members in the U.S. will get Prime at no additional cost for as long as they are a part of the Amazon team,” said the blog post authored by Udit Madan, vice president of Amazon worldwide operations.

Surging U.S. index futures have sparked rallies across many bourses.

In Asia, the Nikkei 225 jumped 2.1% and Hong Kong’s Hang Seng added 2%, while in Europe the FTSE 100 is up 1.2%, helped by its big bevy of global-growth-sensitive commodity plays.

Germany’s DAX is bouncing 1.4% to flirt with a new record, and the CAC 40 in Paris is jumping 1.9% as the prospect of lower interest rates for consumers boost shares of aspirational brands like Hermes and LVMH.

The dollar is weaker and many commodity prices are higher as traders revel in the Federal Reserve’s 50 basis point interest rate cut on Wednesday.

The greenback is down 0.5% to the euro at $1.1173 and is losing 0.5% versus the U.K. pound to $1.3283. Sterling is at its highest level versus the buck since March 2022 as the Bank of England is not expected, on Thursday, to join its U.S peer in trimming borrowing costs.

Lower U.S. interest rates and the weaker dollar are lifting precious and industrial metals. Gold is up 0.6% to $2,615 an ounce, having broken above $2,600 for the first time on Wednesday, and silver is gaining nearly 3% to $31.54 an ounce.

Copper is advancing 1.6% to $4.37 a pound and WTI crude oil is climbing 1.1% to $71.71 a barrel, partly on hopes looser U.S. monetary policy can help revive global demand.

“The dollar’s trajectory remains data-dependent,” says Saxo’s head of FX strategy, Charu Chanana. “Periods of weakness are possible if certain parts of the U.S. economy falter, but a sustained, structural selloff seems improbable. In fact, a broader global slowdown could bolster the dollar via haven demand.”

Here are some of the companies presenting earnings on Thursday:

Before the opening bell

After the close

Here are some of the potential market catalysts due Thursday for traders to consider:

How are stock-index futures trading:

On Wednesday, the Dow Jones Industrial Average fell 103 points, or 0.25%, to 41,503, the S&P 500 declined 16 points, or 0.29%, to 5,618, and the Nasdaq Composite dropped 55 points, or 0.31%, to 17,573.

U.S. equity futures are surging early Thursday in a belated expression of optimism after the Federal Reserve cut interest rates for the first time in more than four years.

Markets on Wednesday had delivered a cautious response to the U.S. central bank chopping borrowing cost by a chunkier-than-usual 50 basis points, with the S&P 500 closing the session down 0.3% after some volatile trading.

However, after a period of reflection buyers have emerged with some gusto, thankful that a cycle of lower borrowing costs has begun even as the economy shows signs of enduring only a mild slowdown.

If the S&P 500 holds the gains indicated by futures it will register its highest ever close.