By Martin Baccardax, TheStreet, 2024-09-19
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U.S. equity futures powered firmly higher in early Thursday trading, putting the S&P 500 on pace for a fresh record high, following a big rate cut from the Federal Reserve and forecasts that suggest a soft landing for the world's biggest economy.
Updated at 7:04 AM EDT
Bank of England
The Bank of England held its key Bank Rate steady at 5% following its regular policy meeting in London, while cautioning on the risks of cutting "too fast or by too much" in an economy that is still feeling elevated inflation pressures.
The 8-1 decision, which markets widely expected, had little impact on the pound, which was last marked 0.188% higher against the U.S. dollar at 1.3307.
Stock Market Today
The Fed's first rate cut in more than four years, which lowered its key lending rate by half a percentage point to between 4.75% and 5%, ended one of the longest stretches of no policy change on record last night.
Chairman Jerome Powell noted confidence in the inflation outlook and concerns tied to the job market. Powell insisted that the economy was in "good shape" despite some labor-market cooling.
He hinted that Wednesday's rate cut and the two more reductions forecast in the Fed's Summary of Economic projections, would enable a so-called soft landing, which tames inflation without inducing recession.
"We're committed to maintaining our economy's strength by supporting maximum employment and returning inflation to our 2% goal," Powell told reporters in Washington.
"If you look at the growth in economic activity data — the retail-sales data that we just got, second-quarter GDP — all of this indicates an economy that is still growing at a solid pace, so that should also support the labor market over time," he added.
The outsized cut, while anticipated by Wall Street, still caught some corners of the market by surprise, with Treasury bond yields nudging higher amid concern that the Fed's efforts to support growth could reinflate an already solid economy.
Related: Fed delivers on big rate cut, signals focus on cooling job market
Benchmark 2-year-note yields were last marked 4 basis points higher than their predecision levels at 3.579% in overnight trading, while 10-year-note yields were pegged at 3.692%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was last marked 0.02% at 100.565.
“The Fed took a bold step, considering that services inflation is still much higher than average and that the US economy depends on China to continue deflating goods," said George Lagarias, chief economist at London-based Forvis Mazars. "A ‘double cut' necessitates further aggressive moves, and leaves little room to maneuver in case prices rebound.”
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Wall Street's reaction, however, looks far more straightforward, with the Fed committed to aggressive policy easing, the economy growing at a 2.9% clip according to the Atlanta Fed's GDPNow tracker, and corporate earnings forecast to rise both into the end of the year and over the whole of 2025.
The S&P 500 is likely to open at a record high Thursday, with futures contracts tied to the benchmark indicating an opening bell gain of around 84 points.
Futures tied to the Dow Jones Industrial Average, meanwhile, are priced for a 455 point advance with the tech-focused Nasdaq called 388 points to the upside.
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In overseas markets, Britain's FTSE 100 was marked 1.16% higher in London ahead of the Bank of England's September rate decision, expected at 7 a.m. U.S. Eastern Time. The regional Stoxx 600 benchmark rose 1.08% in Frankfurt.
Overnight in Asia, the Nikkei 225 closed at a two-week high after rising 2.13% on the session, ahead of tomorrow's Bank of Japan rate decision.
The regionwide MSCI ex-Japan index, meanwhile, was marked 1.24% higher into the close of trading.
Related: Veteran fund manager sees world of pain coming for stocks
