Market Rebound: Investors Digest Fed’s Hawkish Shift
After a tumultuous day on Wall Street, U.S. stock index futures bounced back on Thursday as investors absorbed the Federal Reserve’s unexpected projections. The Fed’s announcement of fewer interest rate cuts and higher inflation expectations for 2025 sent shockwaves through the market, prompting a sharp decline in the three main U.S. stock indexes.
A Shift in Monetary Policy
The Fed’s revised forecast indicates a more optimistic outlook on the U.S. economy, with only two 25 basis point cuts expected in 2025. This marks a significant departure from its September forecast, which predicted half a percentage point more in rate cuts. The central bank’s hawkish shift is attributed to the ongoing strength of the U.S. economy and the prospect of higher inflation under the new administration.
Investors Adjust Risk Exposure
As investors reassess their risk exposure, the benchmark S&P 500 hit a near one-month low on Wednesday. The Dow, meanwhile, experienced its longest streak of losses since 1974, dropping for the tenth consecutive session. However, premarket trading on Thursday saw stocks recover some ground, with megacap companies like Tesla and Nvidia gaining over 2% each.
Corporate News: Winners and Losers
Among corporate news, Micron slumped 14.5% after reporting quarterly revenue and profit below estimates. Accenture, on the other hand, gained 5.6% after beating Wall Street estimates for first-quarter revenue. Homebuilder Lennar shed 10.4% after reporting fourth-quarter results below estimates, while cybersecurity firm SentinelOne rose 3.1% following an upgrade from Jefferies.
Economic Data Ahead
Thursday’s data docket includes a final reading of gross domestic product for the third quarter, alongside weekly jobless claims data. As investors navigate the shifting landscape, they will be closely watching these economic indicators for signs of continued growth.
Volatility Eases
The CBOE volatility index, Wall Street’s fear gauge, eased to 20.91 points from a four-month high of 28.32 a day earlier. This suggests a slight decrease in market anxiety, but investors remain cautious in the face of the Fed’s hawkish shift.
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