Nasdaq 100 and S&P500 Edge Higher as Traders Await Fed’s Rate Cut Announcement

Wall Street Futures Edge Higher as Post-Election Rally Continues, Focus Shifts to Fed

U.S. stock futures were mixed on Thursday, extending gains after a significant rally following Donald Trump’s victory in the presidential election. The Dow, S&P 500, and Nasdaq all reached record highs Wednesday, with the Dow surging over 1,500 points. The small-cap Russell 2000 gained more than 5%, signaling strong investor sentiment as markets await the Federal Reserve’s rate decision.

At 13:45 GMT, Dow Futures are trading 43908.00, up 7.00 or +0.02%. S&P 500 Index futures are at 5968.50, up 10.25 or +0.17% and Nasdaq futures are trading 20960.75, up 66.75 or +0.32%.

Federal Reserve Rate Decision Looms

The Federal Reserve’s interest rate announcement Thursday afternoon is a key focus. A quarter-point rate cut is widely expected, as indicated by CME FedWatch Tool data, which shows near-certainty for this reduction. Expectations for additional cuts in early 2024 have eased, as post-election Treasury yields climb. Market data now indicates a 54% probability the Fed will hold rates steady in January.

Richard Flynn, Managing Director at Charles Schwab UK, noted, “Today’s announcement should give investors a moment of clarity after recent market volatility.” The Fed’s guidance will be closely watched for indications on future monetary policy direction.

Sector Performances Mixed Post-Election

While bank stocks, the U.S. dollar, and Bitcoin advanced following Trump’s win, clean energy stocks faced pressure. SolarEdge Technologies, for instance, dropped following a downgrade to “underperform” from Bank of America. Analysts cited concerns that Trump’s policies, including potential revisions to the Inflation Reduction Act and possible tariffs, could hinder the solar sector. “Inverter companies like SolarEdge may face challenges,” noted Bank of America’s Dimple Gosai.

Conversely, Moderna surged 10% in premarket trading after reporting higher-than-expected COVID vaccine sales and a surprise Q3 profit. Lyft shares also jumped 24% following strong earnings and guidance that exceeded expectations.

Small-Cap Stocks Show Signs of Overextension

After a 5% jump in the Russell 2000, analysts such as RBC’s Lori Calvasina are cautious on small-cap growth potential. Valuations are nearing historical peaks, which may limit further gains. RBC noted that small caps previously saw only short-lived gains after the 2016 and 2020 elections, hinting that this rally could face resistance.

Market Outlook

The immediate focus is on the Fed’s decision, likely to bring a quarter-point cut. While Wall Street may rally further on this news, limited room for gains in small caps and potential rate stabilization early next year suggest a cautious near-term outlook. Traders will watch inflation trends and Fed communications for additional market direction.