Stocks looked set to open in the green Thursday after the Federal Reserve delivered the interest-rate cut the market has long desired. Fed Chair Jerome Powell also signaled further easing, which buoyed investors.
Futures tracking the Dow Jones Industrial Average were up 277 points, or 0.6%, after the blue-chip index finished higher in Wednesday trading. Futures tied to the S&P 500 were rising 0.8% while Nasdaq 100 futures were up 1.0%, after those two indexes finished marginally lower in the previous session.
The specter of President Donald Trump had loomed over the monetary policy meeting with his pick to join the central bank’s board, Stephen Miran, in attendance alongside Lisa Cook, who the president had unsuccessfully tried to remove from office.
Market watchers had said Fed Chair Jerome Powell could face a fight to present a united front, but ultimately Miran’s was the lone dissenting voice.
Concerns about weakness in the labor market won out over inflation jitters as the bank cut its target range for the federal-funds rate by a quarter point to between 4% and 4.25% and pivoted toward a sequence of rate cuts.
The latest dot plot of interest-rate expectations shows a median projection of a half percentage point more of rate cuts in 2025, which could result in two further cuts this year. Policymakers also expect to lower rates by a quarter-point in 2026.
“While the unemployment rate remains low, it has edged up, job gains have slowed, and downside risks to employment have risen at the same time, inflation has risen recently and remains somewhat elevated,” Powell said at a news conference Wednesday.
Miran stopped the move from being unanimous, pushing instead for a bumper half-point cut. His presence on the board of governors has reignited investor concerns over whether the central bank can remain an independent entity but markets reacted positively in the wake of the decision before falling back in later trading.
The Fed’s change of direction comes as other economies are winding down their cycles of monetary policy easing. The Bank of England will report its latest rate decision later today and is widely expected to follow the European Central Bank in holding steady.
U.K. policymakers have lowered rates five times since August 2024, cutting at three-month intervals but now face an inflation rate stubbornly staying above the central bank’s target.
China will again be in focus Thursday as discussions continue with Washington about the future of TikTok and U.S. tariffs. The relationship between the world’s two largest economies was complicated further yesterday after a report emerged that Beijing had banned the use of Nvidia’s chips by Chinese companies including Alibaba and TikTok parent ByteDance.
It could have a wider effect on the chips sector as the country signals its commitment to developing cutting-edge chips domestically.
“It gives China’s chip manufacturers a sign that Beijing is firmly committed to its goal of self-sufficiency,” said Capital Economics China Economist Leah Fahy in a note.
The dollar was one of the winners after the Fed rate decision and continued to rise in early trading Tuesday, with the DXY index up 0.4% against a basket of currencies.
Treasuries also benefited, with the 10-year yield rising to the highest level in a week after the meeting, although it was falling in early trading Thursday—down 1.2 basis points to 4.063%. The two-year Treasury yield eased 0.7 basis point to 3.537%, while the 30-year yield fell 1.6 basis points to 4.657%, according to Tradeweb data.