(Reuters) – U.S. stock index futures rose sharply on Thursday, with those tracking the Nasdaq rising nearly 2 percent after the Federal Reserve kicked off its easing cycle with a half-percentage point cut, helping to ensure a soft landing for the world’s largest economy.
Rate-sensitive growth stocks such as Microsoft, Meta and Alphabet, which have led much of the rally this year, each rose more than 1.5% in pre-market trading.
Chip stocks also rose, with Nvidia up 2.8%, Advanced Micro Devices up 3% and Broadcom up 3.4%.
Futures tracking the domestically focused Russell 2000 index also rose 2.5% to their highest level since July 31.
Lower interest rates could mean that companies that rely on credit can expect lower operating costs and higher profits.
At 4:59 a.m. ET, the Dow E-minis were up 398 points, or 0.96%, the S&P 500 E-minis were up 76.25 points, or 1.34%, and the Nasdaq 100 E-minis were up 355.75 points, or 1.82%.
After issuing a sweeping assessment on Thursday, the Fed assured that it was not an emergency measure and presented projections that analysts say reflect conditions under which the economy could achieve a “Goldilocks scenario,” with growth stable and inflation and unemployment low.
Traders now estimate a 64.2% chance that the central bank will cut interest rates by 25 basis points at its November meeting, according to the CME Group’s FedWatch tool. The central bank is expected to cut rates by 72 basis points by the end of the year, according to LSEG data.
On the data front, investors will be analyzing weekly jobless claims and existing home sales for the month of August.
The market reacted mutedly after the decision, with all three indices closing slightly lower in the previous session.
However, data from Evercore ISI going back to 1970 shows that the S&P 500 gained an average of 14% in the six months following the first taper of a rate cut cycle.
September has been a disappointing month for U.S. stocks overall, with the S&P 500 losing an average of 1.2% since 1928. The S&P 500 has suffered losses so far this month but is close to record highs, and the blue-chip Dow is just shy of its milestone.
JPMorgan Chase & Co rose 1.1%, Bank of America climbed 1.6%, Wells Fargo rose 1.5% after the major banks cut their respective prime rates. Citigroup also rose 1.5% after it cut its base lending rate.
Dell rose 2.8% after paying a quarterly cash dividend.
(Reporting by Johann M Cherian in Bengaluru; Editing by Nivedita Bhattacharjee)
