S&P 500 Futures Respond Bullishly to Fed’s Rate-Cut Signals, Dow Gears Up for Breakthrough

Early on Thursday, U.S. stock index futures saw gains as investors continued to applaud an unexpected dovish shift in the Federal Reserve’s policy.

Here’s the current status of stock-index futures trading:

• S&P 500 futures (ES00) climbed 0.2%, or 10 points, to 4771.
• Dow Jones Industrial Average futures (YM00) increased by 0.2%, or 75 points, reaching 37563.
• Nasdaq 100 futures (NQ00) dipped 0.4%, or 61 points, landing at 16838.

Wednesday’s market performance showed the Dow Jones Industrial Average rising 1.4% to 37090, the S&P 500 increasing 1.37% to 4707, and the Nasdaq Composite gaining 1.38% to 14734.

Driving the market are key factors:

Investor sentiment remains positive after the Federal Reserve’s surprising announcement, signaling the conclusion of its interest rate hike cycle and contemplating a 75 basis points rate cut in 2024.

The Bank of England and the European Central Bank are expected to maintain their main interest rates at 5.25% and 4%, respectively.

Anticipation of lower U.S. borrowing costs in the coming year has propelled equities and bonds, with the Dow Jones Industrial Average reaching an all-time high and the 10-year Treasury yield dropping to its lowest level since early August.

Stephen Innes, managing partner at SPI Asset Management, noted the unexpected shift’s harmonious resonance across global financial markets.

Investor optimism persisted on Thursday, with 10-year Treasury yields dropping to 3.95%, and stock-index futures extending their rally.

The Dow was set to establish a new record, aided by Apple shares.

The S&P 500, up 22.6% in 2023, was on course to open only about 2% below its record. The S&P 500 Equal Weight Index also reached its highest level in 21 months.

Despite positive trends, some analysts cautioned against potential overconfidence and a short-term overextension of the rally.

The CBOE VIX index, gauging expected S&P 500 volatility, was at its lowest in about four years, and the S&P 500’s 14-day relative strength index closed at 78.2, surpassing the overbought threshold of 70.

Mark Newton, head of technical strategy at Fundstrat, highlighted positive aspects but expressed concerns about elevated RSI readings and an unchanged risk/reward scenario after a roughly 13% rally in the last seven weeks.

Economic updates scheduled for Thursday include weekly jobless claims, November retail sales, and November import prices at 8:30 a.m. Eastern. Business inventories for November will be released at 10 a.m.

Costco and Lennar are set to release their results after the closing bell.