U.S. stock futures rose slightly on Friday, paving the way for strong weekly gains after Wall Street expectations for a deep rate cut by the Federal Reserve shot up overnight.
S&P 500 futures (ES=F) rose 0.2%, while Nasdaq 100 futures (NQ=F) added 0.1%, pointing to a fifth day of gains for both indicators amid a comeback for tech stocks. Dow Jones Industrial Average futures (YM=F) also added about 0.2%.
Stocks are rising as the market warms to the likelihood of a half-point rate cut by the Fed, after the odds of a major turnaround were all but written off in light of recent inflation and jobs data. Traders are now pricing in a 45% chance of a 50 basis point move next week, up from 15% at one point on Thursday.
Read more: Fed Forecasts for 2024: What Experts Say About the Possibility of a Rate Cut
The odds of a 0.5% cut have risen amid reports from the Financial Times and The Wall Street Journal that the size of the Fed’s Sept. 18 decision will be a close call. Influential former New York Fed President Bill Dudley added to the debate that there is a “strong case” for a deeper cut.
The yield on the benchmark 10-year Treasury note (^TNX) fell 3 basis points to around 3.65% on Friday morning. At the same time, the yield on 2-year notes, which are seen as sensitive to monetary policy, fell to just above 3.58%.
Markets have been roiled in recent days by shifting speculation over whether the Fed will opt for a quarter-point or half-point cut when it delivers its expected first rate cut of the cycle. Concerns about a slowing labor market and the risk of a recession have helped fuel the volatility — which Wall Street warns could persist if a 0.5% cut is made.
In individual stocks, Adobe (ADBE) shares fell in premarket trading after the software maker’s outlook showed no recovery from its AI push. Meanwhile, Oracle (ORCL) shares rose again on an optimistic forecast for revenue growth over the next five years, fueled by cloud demand.
Shares of Boeing (BA) fell after factory workers went on strike, halting production at the planemaker’s largest hub, Seattle.
