U.S. stock index futures showed a slight decline on Friday, following a strong rally that positioned Wall Street’s major indices for a positive week. This shift came shortly after the Federal Reserve made significant changes to its monetary policy earlier this week.
On Thursday, the S&P 500 achieved its eighth consecutive gain out of nine trading sessions, closing at a historic high and surpassing its mid-July record. The Dow Jones Industrial Average also reached new heights, closing above the notable threshold of 42,000 points. Both the S&P 500 and the tech-heavy Nasdaq are anticipated to record weekly gains exceeding 1%, defying the common trend of September being a challenging month for U.S. equities.
As of 7:12 a.m. ET, Dow E-minis were poised to dip by 7 points (0.02%), S&P 500 E-minis were down 18 points (0.31%), and Nasdaq 100 E-minis were off by 101 points (0.50%).
Investor sentiment received a boost earlier in the week as the Federal Reserve initiated an easing cycle with a substantial 50-basis-point interest rate cut and indicated that additional reductions may follow. The central bank also projected an environment of steady economic growth alongside low unemployment and inflation rates.
Analysts at Deutsche Bank noted that the current scenario presents an advantageous situation for equities, with rate cuts occurring outside of a recession—historically, this combination has led to robust stock market performance.
Market participants now assess a nearly 60% chance of a 25-basis-point cut in November, according to the CME Group’s FedWatch tool. Predictions suggest a total rate reduction of 72 basis points by the end of the year, as indicated by LSEG data.
Traders’ attention will be directed towards comments from Patrick Harker, the President of the Philadelphia Federal Reserve, later today, especially in the absence of notable economic reports.
Expect some fluctuations in the market today due to the “triple witching” phenomenon, where options and futures contracts linked to stock indices and individual equities will simultaneously expire.
In premarket activities, FedEx shares fell sharply by 13.1% after the company, often viewed as an economic bellwether, revealed a significant decline in quarterly profits and reduced its revenue forecast for the fiscal year. United Parcel Service shares also experienced a decline, slipping 2.6%.
Conversely, Nike saw a substantial increase of 6% following the announcement that former senior executive Elliott Hill would return to the company as its new president and CEO, succeeding John Donahoe.
Shares of Trump Media & Technology, majority-owned by former President Donald Trump, dropped 4.2% following the expiration of a lock-up period that previously restricted insiders from selling their shares.
In addition, a rebalancing of major indices is forthcoming, with Dell shares down nearly 1% and Palantir Technologies declining by 2.2%, as these stocks are anticipated to be included in the S&P 500 prior to the market opening on September 23.
Globally, investors grappled with whether the dominant world economy is poised for a significant upswing or is on the brink of recession, as central banks in both the UK and Japan took more cautious stances on their interest rates, following the Fed’s recent decisions.
Historically, stock markets tend to perform favorably during periods of interest rate cuts, as reduced borrowing costs alleviate pressures on corporate profits. However, the outlook appears somewhat bleak, with the S&P 500’s valuations currently well above its historical average.
As the market continues to evolve, keeping an eye on these economic indicators and company performances will be crucial for investors looking to navigate the current financial landscape.