US equity-index futures gained on speculation investors are regaining confidence after the Federal Reserve’s decision to cut interest rates, even as questions linger over the pace of future policy easing.
Contracts for the S&P 500 and the Nasdaq 100 indexes both advanced 0.3%, after the underlying benchmarks posted minor declines following Wednesday’s Fed decision. Treasuries recouped some of their losses, while a gauge of the dollar rose for a second day with Fed Chair Jerome Powell terming the move a “risk-management cut.” Shares in Japan and South Korea rose while Australia lagged.
New Zealand’s bonds gained after softer economic data fueled speculation of an outsized rate cut.
An index of global stocks climbed to a record high this week as investors priced in a 25-basis-point cut ahead of the Fed meeting. While the central bank followed through with a cut, officials stressed policy will be decided “meeting by meeting” and warned “there’s no risk-free path” ahead. Even so, policymakers now see two additional quarter-point cuts this year, one more than was projected in June.
“It’s going to be very much business as usual,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors. The market will continue “to chase upside in tech and AI with very little profit taking emerging from the Fed event, despite most indices at or close to their record highs.”
The Fed cut its benchmark interest rate by a quarter percentage point and penciled in two more reductions this year following months of intense pressure from the White House to slash borrowing costs. The Federal Open Market Committee voted 11-1 to lower the target range for the federal funds rate to a range of 4% to 4.25%.
Chair Jerome Powell pointed to growing signs of weakness in the labor market to explain why officials decided it was time to cut rates after keeping them on hold since December amid concerns over tariff-driven inflation.
“The Fed finally pulled the trigger, but the market’s reaction was anything but straightforward,” said Armina Rosenberg, co-founder and co-portfolio manager at Minotaur Capital in Sydney. “The cut itself wasn’t a huge surprise, though the combination of a dovish move with still-cautious guidance left investors in two minds.”
The market is grappling with cross-currents — easier policy on one hand, but persistent inflation, fragile growth signals, and the ongoing US-China tech decoupling on the other, she said.
Powell pushed back against bond traders betting the Fed would sweep in with a series of aggressive rate cuts to prevent the US economy from stalling. The Fed chair indicated he’s not abandoning his cautious approach, still mindful of the risks of inflation.
“The dot plot now implies two more cuts this year, but Powell downplayed its significance,” given the risk of further jobs weakness, said Dan Siluk at Janus Henderson Investors. “The messaging remains nuanced and far from a full pivot,” he said.
Elsewhere in Asia, China’s cyberspace regulator instructed companies including Alibaba Group Holding Ltd. to halt orders for a Nvidia Corp. semiconductor that can be used for AI applications.
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