Dow futures jump 200 points after Fed hints at rate cut, Amazon and Netflix lead gains

U.S. stock index futures were sharply higher Thursday morning after the Federal Reserve on Wednesday signaled possible interest rate cuts later this year.

Around 6:47 a.m. ET, Dow Jones Industrial Average futures indicated a positive open of more than 200 points. Futures on the S&P 500 and Nasdaq 100 were both seen higher as well.

The Fed signaled on Wednesday interest rate cuts could be coming, beginning as early as July. Policymakers said they would stand ready to battle growing global and domestic economic risks as they took stock of intensifying trade tensions and growing concerns about inflation.

Most Fed policymakers slashed their rate outlook for the rest of the calendar year by approximately half a percentage point in the previous session, while Chairman Jerome Powell said others agree the case for lower rates is building.

Many market participants viewed the overall tone from the U.S. central bank as more dovish-than-expected. Traders are now pricing in a 100% chance of a rate cut next month, according to the CME FedWatch tool.


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“The Fed is not in the business of validating market pricing except when they are both heading in the same direction, and that is what the central bank did yesterday,” said Steven Bliz, chief U.S. economist at TS Lombard, in a note. “Without an economic emergency on his hands – and there isn’t one – we could view yesterday’s no-cut cut as a simple declaration of the Fed’s independence while, at the same time, solidifying in the market the easing the Fed wants priced in.”

The Fed’s message briefly sent the 10-year Treasury yield below 2% for the first time since November 2016. Investors bid stock futures higher overnight on the decline in the benchmark for mortgage rates and corporate bonds. The yield stood at 2.8% in January.

Netflix and Amazon were among the best performers in the premarket, rising 1% each. Facebook, Apple and Alphabet also gained around 1%.

These are some of the best-performing stocks of the past 10 years. Low rates have been fuel for the bull market, allowing companies to borrow money cheaply to repurchase stock. Tech stocks have led the gains over the years.

On the data front, investors are likely to monitor the latest weekly jobless claims figures, first-quarter current account data, and the Philadelphia Fed manufacturing survey for June due out at 8:30 a.m. ET. Leading index figures for May will follow slightly later in the session.

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