Dow Jones futures soared overnight alongside S&P 500 and Nasdaq futures, reflecting notable market shifts after the Federal Reserve’s recent rate cut announcement. In a surprising turn, stocks rallied initially on Wednesday as the Fed announced a significant 50 basis point rate cut, propelling both the S&P 500 and Dow Jones to new record highs. However, as trading progressed, major indexes pulled back, ultimately closing slightly lower despite assurances from Fed Chair Jerome Powell that further easing could be on the horizon, in conjunction with a potential gentle economic slowdown.
Following the Fed’s decision, Nvidia (NVDA) experienced a dip from its 50-day average, while Apple (AAPL) appreciated yet encountered resistance at key levels. Tesla (TSLA) approached an early entry point before ending the day lower, while Meta Platforms (META) similarly tested buy points but could not maintain those levels.
Futures for Dow Jones climbed by 0.5%, while S&P 500 futures saw an increase of 0.8%, and Nasdaq 100 futures surged by 1.1%. Concurrently, the Japanese yen depreciated against the dollar, marking a trend that has weighed heavily on both U.S. and global markets recently. The yield on 10-year Treasuries experienced a slight uptick to 3.73%.
Despite this volatility, it’s crucial to remember that overnight movements in futures do not always correlate with actual stock trading during regular hours.
In a landmark decision, the Federal Reserve sliced interest rates – their first cut since the onset of the COVID-19 pandemic, marking a significant shift in monetary policy. While a quarter-point reduction was anticipated by some officials, the decision for a half-point cut was met with a notable level of market optimism. Recent market expectations had already factored in a significant probability of this cut, with investors eyeing a total of 100 basis points of easing planned for 2024, and another potential 100 basis points expected in 2025. This brings the key interest rates to a projected range of between 3.25% and 3.50%.
In his post-announcement remarks, Powell emphasized his confidence in a soft landing for the economy, assuring that the Fed remains proactive in its approach to preventing economic stagnation.
The stock market rally, however, culminated in a slight dip following the Fed announcement, with the Dow Jones Industrial Average closing down 0.25% and the S&P 500 slipping 0.3%. Although both indexes had achieved record intraday highs, the Nasdaq composite also fell by 0.3%, while the small-cap Russell 2000 managed a fractional gain, reversing larger intraday gains.
With crude oil prices retreating slightly to $70.91 a barrel and treasury yields experiencing variations, some growth ETFs also showed mixed performance. The Innovator IBD 50 ETF (FFTY) gained 0.5%, contrasting with a decline in the iShares Expanded Tech-Software Sector ETF (IGV), which fell 0.9%.
Tesla shares dropped 0.3% to 227.20, unable to maintain momentum after reaching an aggressive entry point earlier in the day. October looms large for Tesla, with key events on the horizon, including third-quarter delivery reports and the much-anticipated robotaxi showcase. Meanwhile, Nvidia stock fell 1.9%, underscoring the importance of the 50-day moving average as a critical resistance level for the AI and tech sectors.
Nvidia, along with DoorDash (DASH), which rose by 2% to a pivotal buy point, signals potential action for investors. While the current market dynamics are uncertain post-Fed announcements, astute investors will maintain well-defined exit strategies and refined watchlists to capitalize on emerging opportunities.
As the stock landscape continues to evolve, remain engaged with market analyses to navigate these shifts effectively.