Markets on Wall Street were positioned to open at record highs Thursday after the Federal Reserve issued a bigger-than-usual interest rate cut intended to fortify a cooling labor market and prevent a recession.
Futures for the S&P 500 jumped 1.7% before the bell, while futures for the Dow Jones Industrial Average were up 1.2%. The technology-heavy Nasdaq shot more than 2% higher.
Thursday’s premarket gains came after investors largely shrugged off the Fed’s half-point rate cut a day earlier. Because the Fed’s first cut to interest rates in four years was so well telegraphed, markets had already risen in anticipation of it.
It was the first cut to the federal funds rate since the coronavirus pandemic hit the U.S. in March of 2020, ending a stretch where the country’s central bank kept rates at a two-decade high to slow the economy enough to stifle the worst inflation in generations.
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The Fed’s move may help financial markets both by easing the brakes on the economy, which has been slowing under the weight of higher rates and by boosting prices for all kinds of investments. Besides stocks, gold and bond prices had already rallied in recent months on expectations that rate cuts were coming.
Now that inflation has eased significantly from its peak two summers ago and appears to be heading toward 2%, the Fed says it it can turn more of its attention toward protecting the slowing job market and overall economy.
“The time to support the labor market is when it’s strong and not when you begin to see the layoffs,” Fed Chair Jerome Powell said in a press conference Wednesday. “That’s the situation we’re in.”
Darden Restaurants climbed 7.5% in premarket, even as the owner of Olive Garden and LongHorn Steakhouse posted first-quarter sales and profit that fell short of expectations. Investors may have been encouraged that Darden reiterated its previous guidance, saying sales trends were on an upward trajectory since a July swoon dragged down its most recent results.
Trading in Tupperware Brands remained halted after the company filed for Chapter 11 bankruptcy protection. Its stock has been sinking, down to 51 cents, since a mini-revival early in the pandemic sent its stock above $30.
Package deliverer FedEx and homebuilder Lennar report their latest results after the bell Thursday.
In Europe, Germany’s DAX added 0.8% by midday and the CAC 40 in Paris advanced 1.3%.
In London, the FTSE 100 gained 0.9% after the Bank of England left its interest rate untouched at 5% as expected.
In Asian trading, Tokyo’s Nikkei 225 index rose 2.1% to 37,155.33, lifted by major export manufacturers’ shares. Toyota Motor Corp. surged 5.1%, Sony Group Corp. added 2.9% and Hitachi Ltd. climbed 5.8%.
Hong Kong’s Hang Seng gained 2% to 18,013.16.
The Shanghai Composite index climbed 0.7% to 2,736.02, while Taiwan’s Taiex closed 1.7% higher.
South Korea’s Kospi rose 0.2% to 2,580.80.
The Bank of Japan and the Bank of England are also holding monetary policy meetings this week. Neither central bank is expected to move on rates, though the language of what the officials say could be an indicator of later moves and still influence markets.
In other dealings, U.S. benchmark crude oil gained 70 cents to $70.58 per barrel in electronic trading on the New York Mercantile Exchange.
Brent crude, the international standard, was up 65 cents at $74.30 per barrel.
The dollar rose to 142.93 Japanese yen from 142.29 yen. The euro rose to $1.1158 from $1.1120.
On Wednesday, the S&P 500 slipped 0.3% and the Dow dipped 0.2%. The Nasdaq composite lost 0.3%.
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