Dow Futures Rise: Will the Fed’s Rate Cut Drive a Lasting Recovery? Traders Await Powell’s Update

Dow Futures Recover as Traders Focus on Fed Decision

U.S. stock futures ticked higher on Wednesday, with the Dow Jones Industrial Average futures gaining 129 points, or 0.29%, after a nine-day losing streak. S&P 500 futures rose 0.14%, while Nasdaq futures were flat. This rebound follows the Dow’s longest slump since 1978, with the potential to match a 1974 record if losses extend another day.

What Is Driving the Dow’s Underperformance?

The Dow’s recent underperformance reflects a shift away from traditional sectors into technology stocks, which have driven gains in broader indices like the Nasdaq. Despite the selloff, the Dow is less than 4% off its all-time high. Conversely, the S&P 500 is up slightly for December, and the Nasdaq has climbed 4.6%, supported by strong interest in growth-oriented tech shares.

Tech stocks’ dominance highlights a structural divergence between older economy stocks and high-growth industries. This rotation underscores traders’ preference for sectors with higher future earnings potential, particularly in a period of moderating interest rates.

Which Stocks Are Moving Before the Market Opens?

Nvidia shares rose nearly 3% in premarket trading, rebounding from a correction earlier this week. Broadcom, another major chip stock, moved lower as investors shifted focus back to Nvidia. General Mills dropped 5% after revising its 2025 earnings outlook downward, citing softer demand expectations.

Other notable movers include Jabil, which surged 8% on stronger-than-expected fiscal Q1 results and upgraded full-year guidance. Xometry gained 4.6% after JPMorgan highlighted its growth potential, while Birkenstock rose 2% on robust quarterly earnings. Nissan jumped sharply following reports of a possible merger with Honda, adding momentum to automaker stocks.

What Will the Fed’s Decision Mean for Markets?

At 19:00 GMT, the Federal Reserve is widely expected to announce a 0.25% rate cut, with a 95% probability priced into futures markets. However, traders will closely analyze the Fed’s updated economic projections and Fed Chair Jerome Powell’s press conference for signals on the policy outlook for 2024.

Analysts predict the Fed may adopt a hawkish tone to temper expectations for additional rate cuts in the coming year, given persistent inflationary pressures. While this could trigger immediate market volatility, historical patterns suggest that such moves often reverse within days.

Market Forecast: Is the Rebound Sustainable?

The Dow’s recovery hinges on the Fed’s messaging and its implications for interest-rate-sensitive sectors. A hawkish tone could limit upside potential, especially for value-oriented stocks. However, the resilience of technology and growth sectors suggests broader market indices are likely to remain supported.

Short-term, traders should watch for volatility post-Fed decision, but longer-term sentiment appears cautiously optimistic, bolstered by solid tech performance and selective strength in consumer stocks.

More Information in our Economic Calendar.