Rate-sensitive stocks were among the biggest gainers in early trading
by Andre Janse van Vuuren and Levin Stamm
US stock futures advanced and Treasury yields fell after the Federal Reserve delivered its first interest rate cut of 2025 and signaled that more are likely to follow soon as officials moved to support the economy.
Contracts on the S&P 500 rose 0.9% on Thursday, shaking off a choppy few hours after the Fed’s quarter-point reduction on Wednesday. Nasdaq 100 futures gained more than 1%. US government bonds recovered, with the 10-year yield slipping four basis points to 4.05%. The dollar held on to its post-Fed advance.
Markets were unsettled in the immediate aftermath of the Fed’s decision. Traders weighed policymakers penciling in two more rate cuts for 2025 against Chair Jerome Powell’s warning that “there are no risk-free paths” as the Fed looks to support jobs and contain inflation.
“The ‘front-loading’ is probably the most important part of all this,” said Michael Brown, research strategist at Pepperstone Group Ltd. “If labor market weakness persists, then the Fed will continue to cut. The monetary backdrop is set to become much easier, much sooner.”
Rate-sensitive stocks were among the biggest gainers in early trading, with Nvidia Corp. and Tesla Inc. leading the Magnificent Seven tech giants. The sector has powered the S&P 500’s rebound to record highs, while the prospect of lower rates is also boosting smaller stocks. Futures on the Russell 2000 rose more than 1.4%.
“The Fed-put is back in action,” said Stephan Kemper, chief investment strategist at BNP Paribas Wealth Management. “Cutting rates with inflation that high is an unusual move. Markets seem to assume that the Fed kind-of decided which part of its dual mandate it’s willing to throw under the bus.”
In the UK, attention will turn later on Thursday to the Bank of England’s policy decision at noon in London. Officials are expected to leave the benchmark rate unchanged at 4% and could shut the door to further cuts in 2025, with inflation still running hot.
Economists and investors also anticipate the BOE will rein in its quantitative tightening program, amid concern that its gilt sales have been adding to volatility in the bond market.
Earlier, Norway’s central bank delivered its second reduction of borrowing costs this year, but signaled that it may be slow to cut them further amid stubborn inflation.
What Bloomberg strategists say...
“The US dollar should enjoy today’s respite as it will be short-lived. Next week Fed speakers will be back in full force and they could sound more dovish than was implied during this week’s policy decision. Stephen Miran called for a 50-bp cut this week and others may follow to speed up the process of lowering rates through next year.”
—Mark Cranfield, MLIV strategist.
Corporate News:
- China has decided to end an antitrust investigation into the dominance of Google’s Android in the world’s largest smartphone arena, the Financial Times reported, citing people briefed on the move.
- Mediobanca SpA Chief Executive Officer Alberto Nagel is expected to resign Thursday along with the rest of the lender’s board, paving the way for a change of governance after Banca Monte dei Paschi di Siena SpA effectively won control over the rival.
- Roche Holding AG agreed to buy biopharmaceutical company 89bio Inc. for as much as $3.5 billion, another acquisition to position itself in the booming market to treat obesity and related illnesses.
- Shareholders wiped A$3 billion ($2 billion) off the market value of Australia’s Santos Ltd. after a third attempted sale faltered, raising pressure on the oil and gas group to boost its valuation and returns — or find an alternative partner.
- Tesla Inc. is working on a redesign of its door handles, which have drawn scrutiny over safety incidents that trappd passengers inside their vehicles.
- Meta Platforms Inc., seeking to turn its smart glasses lineup into a must-have product, on Wednesday unveiled its first version with a built-in screen.
- Cracker Barrel Old Country Store Inc. fell sharply after offering sales guidance that missed expectations, showing the brand is still dealing with the fallout from its controversial and short-lived logo change.
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.9% as of 10:19 a.m. London time
- S&P 500 futures rose 0.9%
- Nasdaq 100 futures rose 1%
- Futures on the Dow Jones Industrial Average rose 0.7%
- The MSCI Asia Pacific Index fell 0.4%
- The MSCI Emerging Markets Index fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.2% to $1.1836
- The Japanese yen fell 0.2% to 147.31 per dollar
- The offshore yuan was little changed at 7.1038 per dollar
- The British pound rose 0.1% to $1.3644
Cryptocurrencies
- Bitcoin rose 1.4% to $117,313.22
- Ether rose 2.1% to $4,601.01
Bonds
- The yield on 10-year Treasuries declined four basis points to 4.05%
- Germany’s 10-year yield was little changed at 2.68%
- Britain’s 10-year yield was little changed at 4.63%
Commodities
- Brent crude fell 0.3% to $67.76 a barrel
- Spot gold rose 0.2% to $3,668.34 an ounce
This story was produced with the assistance of Bloomberg Automation.
Copyright Bloomberg News
