The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to extend the rally seen late in the previous session.
The markets may continue to benefit from a positive reaction to yesterday’s monetary policy announcement by the Federal Reserve.
While the Fed left interest rates unchanged, as widely expected, the central bank also maintained its forecast for three interest rate cuts this year.
The unrevised rate cut forecast is seen as bullish for stocks, as some investors had been worried recent hotter-than-expected inflation data could lead Fed officials to reconsider lowering rates.
“We view today’s FOMC interest rate decision and press conference as bullish for the equity markets and soft landing scenario,” said Larry Tentarelli, President and Founder, Blue Chip Daily Trend Report.
“A concern that we had going into was the recent higher than forecast CPI readings,” he added. “The FOMC dot plot (FOMC members projections for future interest rate levels) remained unchanged at 3 cuts expected for 2024, which we view as a major positive.”
The futures remained positive following the release of a Labor Department report unexpectedly showing a slight drop by first-time claims for U.S. unemployment benefits in the week ended March 16th.
Stocks showed a lack of direction throughout much of the trading session on Wednesday before rallying following the Federal Reserve’s monetary policy announcement. The major averages all showed strong moves to the upside, reaching new record closing highs.
The major averages reached new highs for the session in the final hour of trading, ending the day sharply higher. The Dow jumped 401.37 points or 1.0 percent to 39,512.13, the Nasdaq surged 202.62 points or 1.3 percent to 16,369.41 and the S&P 500 advanced 46.11 points or 0.9 percent at 5,224.62.
The rally on Wall Street came after the Fed announced its widely expected decision to leave interest rates unchanged but also maintained its forecast for three rate cuts this year.
In support of its dual goals of maximum employment and inflation at a rate of 2 percent over the longer run, the Fed said it once again decided to maintain the target range for the federal funds rate at 5.25 to 5.50 percent.
The target range for the federal funds rate has remained unchanged since the Fed raised rates by a quarter point last July.
While the accompanying statement said Fed officials still need “greater confidence” inflation is moving sustainably toward 2 percent before cutting rates, the projections still point to three rate cuts this year.
The latest projections suggest Fed officials expect rates to be lowered to a range of 4.50 to 4.75 percent by the end of 2024.
The interest rate forecast is unchanged from December and points to three quarter point rate cuts over the next nine months.
At the same time, Fed officials raised their forecast for rates at the end of 2025 to a range of 3.75 to 4.0 percent from the range of 3.50 to 3.75 percent forecast in December.
Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, said the statement and Fed Chair Jerome Powell’s subsequent press conference didn’t break any “new news,” which he called “very bullish for markets.”
“The sum total of this ‘no news is good news’ press conference is that markets continue to have a green light to run higher,” Zaccarelli said.
He added, “We aren’t surprised to see the initial reaction from investors to be to push stock prices up and expect that to continue until some new shock hits the system because this Fed isn’t going to stand in the way of the bull market.”
Airline stocks moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 3.8 percent after ending Tuesday’s trading at its lowest closing level in well over a month.
Substantial strength also emerged among gold stocks, as reflected by the 3.8 percent spike by the NYSE Arca Gold Bugs Index. The rally by gold stocks came as the price of the precious metal surged in afterhours trading.
Banking stocks also showed a significant move to the upside on the day, driving the KBW Bank Index up by 2.4 percent to its best closing level in a year.
Networking, brokerage and housing stocks also saw considerable strength, moving higher along with most of the other major sectors.