The major U.S. index futures are currently pointing to a notably higher open on Thursday, with stocks likely to regain some ground following the sell-off seen late in the previous session.
Bargain hunting may contribute to early strength on Wall Street, as some traders look to pick up stocks at reduced levels following yesterday’s steep losses.
The Dow closed lower for the tenth straight session on Wednesday, marking its longest losing streak since 1974
The blue chip index tumbled to its lowest closing level in over a month, while the broader S&P 500 also slumped to a one-month closing low.
Yesterday’s sell-off on Wall Street came after the Federal Reserve announced its widely expected decision to lower interest rates by a quarter point but forecast fewer than previously estimated rate cuts next year.
While strength in the U.S. economy played a factory in the Fed taking a cautious approach to further rate cuts, the futures remained firmly positive following the release of a batch of largely upbeat economic data.
The Commerce Department released a report this morning showing the pace of U.S. economic growth unexpectedly surged by more than previously estimated in the third quarter.
The report said gross domestic product shot up by 3.1 percent in the third quarter, reflecting an upward revision from the 2.8 percent jump previously reported. Economists had expected the pace of growth to be unrevised.
A separate report released by the Labor Department showed first-time claims for U.S. unemployment benefits pulled back by more than expected in the week ended December 14th.
The Labor Department said initial jobless claims fell to 220,000, a decrease of 22,000 from the previous week’s unrevised level of 242,000. Economists had expected jobless claims to dip to 230,000.
Stocks saw modest strength early in the session on Wednesday but plummeted in reaction to the Federal Reserve’s monetary policy announcement. The major averages all moved sharply lower on the day, with the Dow extending its losing streak to ten straight sessions.
The major averages finished the day near their lows of the session. The Dow plummeted 1,123.03 points or 2.6 percent to 42,326.87, the Nasdaq dove 716.37 points or 3.6 percent to 19,392.69 and the S&P 500 plunged 178.45 points or 3.0 percent to 5,872.16.
With the steep drop on the day, Dow saw its longest losing streak since 1974, tumbling to its lowest closing level in over a month. The broader S&P 500 also slumped to a one-month closing low.
The sell-off on Wall Street came after the Federal Reserve announced its widely expected decision to lower interest rates by a quarter point but forecast fewer than previously estimated rate cuts next year.
The Fed said it decided to lower the target range for the federal funds rate by 25 basis points to 4.25 to 4.50 percent, matching the rate cut seen in early November.
With the rate cut almost universally expected, the focus of the announcement was on Fed officials’ latest economic projections.
The latest projections suggest rates will be in a range of 3.75 to 4.0 percent by the end of 2025 compared to the range of 3.25 to 3.50 percent forecast in September.
Assuming the Fed lowers rates by a quarter point, the projections point to just two rate cuts next year compared to the four previously forecast.
The forecast for fewer rate cuts comes as Fed officials expect inflation to come in hotter than previously estimated in 2025, with consumer price growth expected at 2.5 percent compared to the 2.1 percent forecast in September.
During his post-meeting press conference, Fed Chair Jerome Powell said the central bank will be looking for additional progress on inflation before considering further rate cuts, noting annual price growth has recently been moving sideways.
Notably, the decision to lower rates at this meeting was not unanimous, as Cleveland Fed President Beth M. Hammack preferred to leave rates unchanged.
Gold stocks moved sharply lower as the price of the precious metal plummeted in after hours trading, dragging the NYSE Arca Gold Bugs Index down by 4.6 percent to its lowest closing level in over four months.
Substantial weakness also emerged among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index plunging by 4.3 percent and 4.2 percent, respectively.
Interest rate-sensitive commercial real estate stocks also saw considerable weakness, resulting in a 4.0 percent nosedive by the Dow Jones U.S. Real Estate Index.
Software, housing, semiconductor and steel stocks also showed significant moves to the downside amid broad based weakness on Wall Street.
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