The major U.S. index futures are currently pointing to a modestly higher open on Thursday, with stocks poised add to the substantial gains posted over the two previous sessions.
Stocks may continue to benefit from optimism about what a second Donald Trump presidency will mean for the markets and the U.S. economy.
Overall trading activity is likely to be somewhat subdued, however, as traders look ahead to the Federal Reserve’s monetary policy announcement this afternoon.
With the Fed widely expected to lower rates by 25 basis points, traders are likely to pay close attention to the accompanying statement for clues about the outlook for future rate cuts.
Ahead of the announcement, CME Group’s FedWatch tool is indicating a 67.4 percent chance the Fed will cut rates by another 25 basis points in December but a 32.2 percent chance rates will be left unchanged.
On the U.S. economic front, a report released by the Labor Department showed a modest rebound by first-time claims for U.S. unemployment benefits in the week ended November 2nd.
Stocks skyrocketed during trading on Wednesday, as traders celebrated Donald Trump’s victory in the presidential election. The major averages added to the strong gains posted during Tuesday’s session, reaching new record closing highs.
The major averages saw further upside in late-day trading, reaching new highs for the session. The Dow soared 1,508.05 points or 3.6 percent to 43,729.93, the Nasdaq surged 544.29 points or 3.0 percent to 18,983.47 and the S&P 500 shot up 146.28 points or 2.5 percent to 5,929.04.
The extended rally on Wall Street came after former President Trump was declared the winner in the presidential election versus Vice President Kamala Harris.
Claiming victory in several key swing states, Trump is projected to win far more than the 270 Electoral College votes needed to secure his return to the White House.
The decisive victory helped avoid the uncertainty that would be created by a prolonged vote counting process and potential legal challenges.
Trump is also seen by the markets as better for corporations and likely to renew the tax cut package enacted during his first term, which was due to expire at the end of 2025.
A Trump administration is also expected to scale back government regulations and be less hostile to mergers and acquisitions.
However, Trump has also called for increased tariffs on China and other countries, which could lead to renewed inflation concerns.
“A side effect of tariffs and higher prices would be interest rates staying higher for longer, which would be unhelpful for the housing market which, in turn, will act as a drag on home-related categories,” said Neil Saunders, Managing Director of GlobalData.
He added, “While Trump promised lower interest rates, and wants more control over the setting of rates, it is not in his immediate gift to enact this kind of change.”
Republicans are also projected to retake control of the Senate for the first time in four years, although control of the House remains up for grabs.
Financial stocks helped lead the rally on Wall Street amid optimism about reduced regulation under Trump, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index soaring by 10.7 percent and 8.2 percent, respectively.
Optimism about fewer regulations also contributed to substantial strength among oil service stocks, as reflected by the 7.8 percent spike by the Philadelphia Oil Service Index.
Airline stocks also showed a significant move to the upside, driving the NYSE Arca Airline Index up by 5.8 percent to its best closing level in over a year.
Telecom, natural gas, semiconductor and software stocks also saw considerable strength on the day, while gold, commercial real estate and pharmaceutical stocks moved sharply lower.