U.S. stock futures surged at the evening of the Asian trading session on Thursday following the Federal Reserve’s decision on Wednesday to reduce interest rates by half a percentage point.
Dow Jones Industrial Average futures saw an increase of 468 points or 1.1%. Despite the Dow closing lower on Wednesday post the Fed’s announcement, futures linked to the S&P 500 rose by 1.5%, while Nasdaq 100 futures advanced by 2%.
The Federal Reserve’s decision to slash its overnight lending rate to a range of 4.75% to 5% from the previous 5.25% to 5.5% took some investors by surprise, with criticism regarding the scale of this initial reduction. This marks the first rate cut by the Fed in four years.
Moreover, the committee, as indicated in its “dot plot”, implies the likelihood of an additional 50 basis points in cuts by the end of the year, aligning with market predictions. Individual officials’ projections within this matrix suggest a total reduction of 1 percentage point by the end of 2025 and 0.5 percentage point by 2026. Altogether, the dot plot depicts a decrease of around 2 percentage points in the benchmark rate, surpassing the reduction from Wednesday.
