Stock futures rose sharply on Thursday after the Federal Reserve reduced interest rates by a half point.
Jerome Powell had damped the mood a little by saying deeper cuts going forward weren’t a given.
Regardless, Nordea said the Fed has shown it will do what is necessary to keep the economy growing steadily. That could limit any negative reaction to bad data, particularly on jobs, which have been volatile and a source of market jitters.
Later, the Bank of England’s rate decision is due. It is expected to hold rates at 5%, having cut in August for the first time in four years.
In recent trading:
Global stocks rose. The Nikkei 225 ended 2.1% higher, helped by a weaker yen. Hong Kong’s Hang Seng Index and Europe’s Stoxx 600 also rose.
Treasury yields rose slightly. The 10-year yield settled Wednesday at 3.685%.
The WSJ Dollar Index extended declines. Sterling strengthened against the dollar to the highest intraday level since March 2022.
ADRs of JD.com and Alibaba jumped premarket after their shares rose in Hong Kong. ADRs of Temu-owner PDD rose almost 3%.
Enphase Energy rose 4% and First Solar rose 4.2% after the Fed cut interest rates. Solar companies are seen as beneficiaries of lower borrowing costs.
FedEx was rising 1.3% ahead of the release of fiscal first-quarter earnings.
Hertz Global Holdings was down 3.8% to $3.56 after Barclays initiated coverage of the company at Underweight with a price target of $3. Avis Budget Group was initiated with an Equal Weight recommendation at Barclays.
Steelcase’s second-quarter revenue and its third-quarter revenue outlook missed analyst expectations. Shares were falling 9%.
Postmarket Movers
America’s Car-Mart plans to sell $65 million of stock in an underwritten public offering. Shares declined 13%.
Exicure was granted a Nasdaq listing extension, subject to showing compliance with all applicable listing criteria by Nov. 14. Share rose 168%.
Progyny said a “significant” client, which accounted for approximately 670,000 of the company’s members and 12% of its revenue in the first half of the year, will terminate its services agreement, effective Jan. 1. Shares fell 25%.
Watch For:
Existing Home Sales for August; Weekly Jobless Claims; Earnings from FedEx, Lennar, Darden Restaurants, FactSet Research Systems, Cracker Barrel Old Country Store
Today’s Headlines/Must Reads:
– Big Rate Cut Forces Fed to Contend With New Obstacles
– The Fed Has Significantly Improved the Odds of a Soft Landing
– The Clean Jet Fuel Technology Winning Over Wall Street
The dollar rose after briefly falling to a near 14-month low on Wednesday in reaction to the Fed cut.
The dollar’s recovery is “probably because the move did not come out of the blue after recent adjustments in market rate-cut expectations and because Powell made it clear that the 50 basis-point easing did not represent the new pace,” Unicredit Research said.
MUFG Bank said the dollar’s recovery is unlikely to last as the currency remains vulnerable to the U.S. rates curve pricing in more cuts.
“The ‘buy the rumour, sell the fact’ philosophy may see some further dollar buying near-term but we would be surprised if there was much momentum to that trade,” MUFG said.
The Fed will likely cut rates faster than its projections suggest and faster than the forward overnight index swaps curve, it added.
Sterling rose ahead of the Bank of England’s policy decision later as the central bank is widely expected to leave interest rates unchanged.
Inflation hasn’t eased enough to warrant further rate cuts just yet, ING said.
The notion that the BOE is treading more carefully than the Fed is contributing to sterling’s strength, it said. “That shouldn’t change after today’s meeting.”
GBP/USD could rise above 1.33 by the end of the week while EUR/GBP could fall below 0.84, ING said.
Bonds:
Historically, bonds of intermediate maturity–or medium-term bonds–have tended to outperform cash during the Fed’s interest-rate cutting cycles, Pimco said.
“With the Fed starting with a bang, investors may benefit from locking in still-attractive intermediate yields.”
Bonds also offer hedging properties in the event that a harder landing prompts the Fed to cut rates more quickly, Pimco added.
Energy:
Oil prices edged higher after a large interest-rate cut from the Fed, but market concerns over the global demand outlook lingered.
Meanwhile, traders were keeping a close eye on the Middle East after Iran-backed Hezbollah was hit by another wave of exploding devices that pointed to a complex attack carried out by Israel.
Both Brent and WTI recently rebounded from multi-year lows, but widespread concerns over weakening demand appeared to be capping further gains.
Metals:
Gold prices nudged higher after the Fed kicked off its monetary easing cycle.
“The FOMC reassured investors that it’s ready and willing to pull the trigger on bigger rate adjustments if needed, but Powell’s cautious message moderated some of that optimism,” Peak Trading Research said.
TODAY’S TOP HEADLINES
Meta to European Union: Your Tech Rules Threaten to Squelch the AI Boom
BRUSSELS-A group of companies including Meta Platforms, Spotify and Italian luxury-fashion giant Prada warned Thursday that the European Union risks missing out on the full benefits of artificial intelligence because of the bloc’s tech regulations.
In an open letter that was coordinated by Meta, executives from more than two dozen companies said AI can boost productivity and expand the economy, but Europe might reap fewer rewards than other jurisdictions.
Adobe Stock Is an Unappreciated AI Play. It’s Time to Buy.
Adobe’s earnings report painted a pretty picture of its ability to turn artificial intelligence into paying customers. But the reaction to its disappointing guidance was anything but pretty. That has created a buying opportunity in its stock.
There was a lot to like about Adobe’s third-quarter results, with both earnings and sales easily topping estimates. The market, though, focused on management’s somewhat disappointing outlook, which included a forecast for “net new annual recurring revenue”-representing the sales Adobe expects to bring in from new customers or from increasing monthly subscription payments-to come in at $550 million in the fourth quarter, up 9% quarter over quarter. The fourth quarter usually sees double-digit growth, and the stock tumbled 13% after the report. It has since settled around $510.
Lower Interest Rates Yield a Loser: Berkshire Hathaway
Berkshire Hathaway was a major beneficiary of the sharp increase in short rates from 2022 through early this year but now stands to lose given the drop in short rates now unfolding with the Federal Reserve’s half-point cut in a key short rate Wednesday.
Berkshire had the largest holdings of cash and equivalents of any U.S. company at $277 billion at the end of the June, compared with Apple at $153 billion and Alphabet at $101 billion.
Boeing Furloughs White-Collar Workers as Strike Worsens Cash Crunch
Boeing is furloughing tens of thousands of white-collar employees in an effort to cut costs and avoid a credit-rating cut in the midst of a strike by its largest union.
The jet maker will furlough affected employees for one week out of every four weeks for the duration of the walkout, Chief Executive Kelly Ortberg wrote in a memo to employees Wednesday.
New Car Registrations Slump in Europe Amid Weakening Demand, Steep EV Decline
Stellantis and Volkswagen posted significant drops in August new-car registrations in the European Union, contributing to a sharp overall decline as demand weakened in key markets and electric-vehicle sales fell.
Consumers in core markets of Germany, France, Italy and Spain drove an 18% on-year drop in the bloc’s monthly registrations, which reflect sales, the European Automobile Manufacturers’ Association said Thursday. EU registrations came to around 643,600 for the month, with every major European carmaker posting declines.
Pentagon Worries Israel Is Close to Launching Ground War in Lebanon
A wave of deadly explosions of pagers and other electronic devices carried by militants in Lebanon has sharply heightened Pentagon concern about a potential ground war erupting in southern Lebanon between Israel and Hezbollah.
Even before the hundreds of widely dispersed detonations Tuesday and Wednesday, U.S. Defense Secretary Lloyd Austin told other senior Pentagon officials in a Monday meeting that he feared Israel could soon launch an offensive, after months of back-and-forth rocket and air attacks with Hezbollah, an Iranian-backed militia group that controls much of southern Lebanon.
Republican Divisions Sink House Bill as Government Shutdown Nears
WASHINGTON-An initial proposal by House Speaker Mike Johnson (R., La.) to fund the government was voted down Wednesday, underscoring the divisions within the Republican Party but potentially setting the stage for talks with Democrats on avoiding a partial shutdown at the end of the month.
The vote on the short-term funding bill was 202 in favor to 220 against, with more than a dozen holdout Republicans joining most Democrats in opposition. Two Republicans voted present.
Putin Is Under Pressure to Call Up More Troops for War of Attrition
Months before President Vladimir Putin’s inauguration in May, he met with Defense Ministry officials who pushed for a fresh round of mobilization to recruit more troops to offset Russia’s losses on the front line in Ukraine, said a person briefed on the exchange.
Putin dismissed the idea, saying he wanted to use only those who were voluntarily signing military contracts, the person said.
