On Thursday, stock index futures saw slight gains, following a day where major Wall Street indices reached new record highs. This surge came after the Federal Reserve maintained its forecast of three interest rate cuts for the year, downplaying concerns regarding recent inflation reports.
Dow futures rose by 0.3%, S&P 500 futures by 0.4%, and Nasdaq 100 futures by 0.7%. Concurrently, rates declined, with the 10-year Treasury yield down 4 basis points at 4.23% and the 2-year yield down 1 basis point at 4.58%.
The Federal Open Market Committee (FOMC) opted to keep its policy rate unchanged at 5.25%-5.50% for the fifth consecutive time. Chairman Jerome Powell indicated that the Fed’s objectives regarding inflation and employment were more balanced, suggesting a relaxed stance. Powell’s dovish-leaning remarks during the press conference contributed to the rise in equities and the decline in yields.
Deutsche Bank’s Jim Reid commented on Powell’s remarks, noting that January’s elevated inflation might have been seasonal, with improvements seen in February’s data. Despite this, Reid’s team anticipates the first rate cut to occur in June, with a total of 100 basis points of cuts expected for the year, although risks lean towards a more hawkish outcome.
Fed officials adjusted their growth and inflation forecasts upward, while scaling back expectations for rate cuts in 2025 and beyond. This move reflects the Fed’s cautious approach, awaiting greater confidence in inflation before implementing further easing measures.
Wells Fargo Investment Institute expressed skepticism regarding the FOMC’s optimistic outlook on rate cuts in 2025, emphasizing the potential challenges in achieving the Fed’s 2% inflation target once the disinflation base effect dissipates.
Market participants are now turning their attention to the upcoming release of initial jobless claims data for further insights into the labor market. Additionally, Thursday’s economic calendar includes existing home sales figures and updates on the Fed’s balance sheet, shaping the day’s trading dynamics.