US stock index futures rise after Fed cuts rates by 50 bps

U.S. stock index futures rose in evening deals on Wednesday after the Federal Reserve cut rates by a wider 50 basis points and kicked off an easing cycle that is likely to see rates fall further.

Futures rose after Wall Street logged a choppy session, given that the large cut also raised some concerns over a slowing economy. But Fed Chair Jerome Powell soothed some of these concerns, stating that he did not see a heightened risk of an economic downturn.

S&P 500 Futures rose 0.3% to 5,699.25 points, while Nasdaq 100 Futures rose 0.4% to 19,667.0 points by 19:13 ET (23:13 GMT). Dow Jones Futures rose 0.2% to 42,006.0 points.

Fed offers bumper cut, more easing likely
The central bank’s Wednesday cut- its first since 2020- was at the higher end of market expectations.

The cut marks the beginning of an easing cycle that is likely to see rates fall further in the coming months. The Fed said a bulk of policymakers expect two more 25 bps cuts this year, but markets expect more.

Citi expects the Fed to cut rates by another 50 bps in its November meeting.

Powell says don’t hold out for ultra-low rates
Still, enthusiasm over the future cuts was limited by Powell stating that the Fed did not intend to return to an era of ultra-low interest rates. The central bank had slashed rates to near negative levels to offset the impact of the COVID-19 pandemic.

The Fed chair said the central bank’s neutral rate was likely to be significantly higher than it was in the past, although he did not specify just how much.

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This notion, coupled with persistent concerns over an economic slowdown, sparked volatility on Wall Street on Wednesday.

The S&P 500 fell 0.3% to 5,618.26 points, while the NASDAQ Composite fell 0.3% to 17,575.67 points. The Dow Jones Industrial Average ended down 0.3% at 41,503 points, with all three indexes falling from session highs to close negative.

Analysts argued that Wednesday’s cut was also largely priced in, given that the S&P and the Dow had both hit a series of record highs in the lead-up to the decision.