Stocks Rally Before the Open After Fed Rate Cut With More Easing Ahead

September S&P 500 E-Mini futures (ESU25) are up +0.84%, and September Nasdaq 100 E-Mini futures (NQU25) are up +1.10% this morning, pointing to a sharply higher open on Wall Street after the Federal Reserve cut interest rates for the first time since December and signaled more reductions could follow soon.

As widely expected, the Federal Reserve cut interest rates yesterday. The Federal Open Market Committee voted 11-1 to lower the target range for the Fed funds rate by a quarter percentage point to 4.00%-4.25%. Newly sworn-in Governor Stephen Miran was the only policymaker to dissent, favoring a larger half-point rate cut. In a post-meeting statement, policymakers said the unemployment rate had “edged up but remains low,” adding that “downside risks to employment have risen.” At the same time, officials acknowledged that inflation has “moved up and remains somewhat elevated.” Policymakers also updated their economic projections and now anticipate two more quarter-point cuts this year. They project one quarter-point cut in 2026 and another in 2027.

At a press conference, Chair Jerome Powell emphasized the Fed’s dual mandate challenges, noting that inflation pressures persist while labor-market data weakens, meaning “there’s no risk-free path” forward. Mr. Powell struck a cautious tone on the outlook for additional rate moves, saying the Fed was now in a “meeting-by-meeting situation.”

In yesterday’s trading session, Wall Street’s three main equity benchmarks closed mixed. Nvidia (NVDA) fell over -2% and was the top percentage loser on the Dow after the Financial Times reported that China’s internet watchdog had banned the country’s biggest technology firms from buying Nvidia’s AI chips. Also, Uber Technologies (UBER) slid nearly -5% and was among the top percentage losers on the S&P 500 after rival Lyft and Alphabet’s Waymo announced plans to expand their fully autonomous ride-hailing service to Nashville in 2026. In addition, General Mills (GIS) dropped about -0.8% after the company posted weaker-than-expected FQ1 revenue. On the bullish side, Workday (WDAY) climbed more than +7% and was the top percentage gainer on the Nasdaq 100 after activist investor Elliott Investment Management disclosed a $2 billion stake in the company.

Economic data released on Wednesday showed that U.S. August housing starts fell -8.5% m/m to 1.307 million, weaker than expectations of 1.370 million, while building permits, a proxy for future construction, unexpectedly fell -3.7% m/m to a 5-1/4-year low of 1.312 million, weaker than expectations of 1.370 million.

Meanwhile, U.S. rate futures have priced in an 89.8% chance of a 25 basis point rate cut and a 10.2% chance of no rate change at the next FOMC meeting in October.

Today, investors will focus on the U.S. Philadelphia Fed Manufacturing Index, which is set to be released in a couple of hours. Economists anticipate that the Philly Fed manufacturing index will stand at 1.7 in September, compared to last month’s value of -0.3.

U.S. Initial Jobless Claims data will also be closely monitored today. Investors will be watching to see whether the prior week’s jump was a harbinger of a sustained downturn in the labor market or was merely a one-off. Economists estimate this figure will come in at 241K, compared to last week’s number of 263K.

The Conference Board’s Leading Economic Index for the U.S. will be released today as well. Economists expect the August figure to drop -0.2% m/m, compared to the previous number of -0.1% m/m.

On the earnings front, notable companies such as FedEx (FDX), Lennar (LEN), and Darden Restaurants (DRI) are slated to release their quarterly results today.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.047%, down -0.74%.

The Euro Stoxx 50 Index is up +1.38% this morning as sentiment got a boost after the Fed resumed its cutting cycle and signaled that borrowing costs could fall further this year. Technology stocks led the gains on Thursday. Data from the European Central Bank released on Thursday showed that the Eurozone’s current account surplus narrowed in July due to a smaller primary income and a lower surplus for services. Meanwhile, ECB Vice President Luis de Guindos said on Thursday that the central bank may not yet have finished its easing cycle. “We do not know if the easing cycle is over. If circumstances change, then we will change,” De Guindos said. Norway’s central bank cut its key policy rate by 25 basis points to 4.00% on Thursday and signaled that monetary easing will proceed at a very gradual pace going forward. Investors now await the Bank of England’s monetary policy decision later in the day, with the central bank widely expected to leave its key rate unchanged at 4.00%. Focus will be on the BoE’s annual adjustment to its U.K. government bond reduction plan. In corporate news, Sig Group AG (SIGN.Z.EB) tumbled over -20% after issuing a profit warning and suspending its cash dividend.

Eurozone’s Current Account data was released today.

Eurozone July Current Account stood at 27.7 billion euros, weaker than expectations of 34.6 billion euros.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -1.15%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.15%.

China’s Shanghai Composite Index closed sharply lower today, reversing steeply after the benchmark index earlier touched a 10-year high. With no clear catalyst driving the decline, profit-taking seemed to take the lead. Real estate stocks led the declines on Thursday. Still, chip stocks were a bright spot on Thursday after the Financial Times reported that China’s internet watchdog had banned the country’s biggest technology firms from purchasing Nvidia’s AI chips, a move viewed as supportive of domestic chipmakers. Also, Huawei introduced its newest solution on Thursday, designed to bundle more AI chips together and boost computing power in an effort to challenge Nvidia’s technology. Meanwhile, China’s central bank kept a key interest rate unchanged on Thursday, as authorities showed little urgency to ease monetary policy despite the Fed’s rate cut and a recent batch of weak data. The People’s Bank of China injected 487 billion yuan ($68.56 billion) worth of seven-day reverse repos through open market operations, keeping the rate unchanged at 1.40% from the prior operation. Investors now await U.S. President Donald Trump’s call with Chinese leader Xi Jinping on Friday, after U.S. and Chinese officials earlier this week reached a framework agreement to keep the TikTok app operating in the U.S.

Japan’s Nikkei 225 Stock Index closed higher and hit a new record high today as optimism spread through the market following the Fed’s widely expected rate cut. Technology and real estate stocks led the gains on Thursday. The benchmark index was also underpinned by a weaker yen. Government data released on Thursday showed that Japan’s monthly core machinery orders, a key leading indicator of capital spending, fell much more than expected in July, driven by weakness in the non-manufacturing sector. Meanwhile, investor attention now shifts to the Bank of Japan meeting, which concludes on Friday. While the central bank is widely expected to leave its short-term policy rate unchanged at 0.5%, investors will be parsing whether Governor Kazuo Ueda hints at the possibility of future rate hikes. Expectations of a BOJ rate hike rose quickly after Tokyo struck a trade deal with the U.S. in July that eased uncertainty surrounding the trade outlook. Those expectations diminished earlier this month when Prime Minister Shigeru Ishiba announced his resignation, raising concerns about political instability and fueling speculation that the new administration may lean toward looser monetary policy. Still, former BOJ executive Tomoyuki Shimoda said on Thursday that the central bank could raise interest rates in October even if Sanae Takaichi, a supporter of aggressive monetary easing, wins the ruling party’s leadership race and becomes the next prime minister. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -0.25% to 24.11.

The Japanese July Core Machinery Orders came in at -4.6% m/m and +4.9% y/y, weaker than expectations of -1.8% m/m and +5.4% y/y.

Pre-Market U.S. Stock Movers

The Magnificent Seven stocks advanced in pre-market trading amid risk-on sentiment, with Nvidia (NVDA) rising over +2% and Tesla (TSLA) gaining more than +1%.

Chip stocks are moving higher in pre-market trading, with Marvell Technology (MRVL) and ON Semiconductor (ON) rising more than +2%.

Intel (INTC) jumped over +27% in pre-market trading after Nvidia said it would invest $5 billion in the chipmaker as part of a partnership to jointly develop PC and data center chips.

Nike (NKE) rose more than +1% in pre-market trading after RBC Capital upgraded the stock to Outperform from Sector Perform with a price target of $90.

Nucor Corp. (NUE) fell over -3% in pre-market trading after the steel company issued below-consensus Q3 EPS guidance.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - September 18th

FedEx (FDX), Lennar (LEN), Darden Restaurants (DRI), FactSet Research (FDS), Scholastic (SCHL).