S&P 500 and Nasdaq 100: Tech Stocks Rally After Fed’s First Rate Cut in Four Years

U.S. Stock Futures Jump on Fed’s Rate Cut Decision

U.S. stock futures surged Thursday following the Federal Reserve’s decision to reduce interest rates by 50 basis points. The Fed’s move to lower the federal funds rate to a range of 4.75% to 5% marked the first rate cut in four years, boosting market sentiment after an initial post-announcement sell-off. Futures on the Dow Jones Industrial Average increased by 493 points (1.2%), while S&P 500 futures rose 1.7%. Nasdaq 100 futures saw a strong uptick of 2.1%, reflecting optimism about the economic impact of lower borrowing costs.

The Fed’s rate cut, which surprised some investors, has raised expectations that future reductions could follow. “This was the best news I’ve heard from the Fed in years,” said Jeremy Siegel, professor emeritus at the Wharton School. Although markets initially reacted with volatility on Wednesday, the positive trend in futures indicates that traders are anticipating further benefits from the Fed’s move.

Tech, Regional Banks, and Solar Stocks Surge as Lower Rates Drive Optimism

Tech stocks saw significant gains following the Fed’s rate cut. Nvidia and AMD shares each surged more than 3%, while Micron Technology climbed over 2%.

Regional bank stocks also rallied, as the SPDR S&P Regional Banking ETF (KRE) jumped nearly 3%, led by New York Community Bancorp’s 3% rise. These gains suggest that investors expect lower interest rates to boost both tech and financial stocks, especially those sensitive to borrowing costs.

Solar stocks were also higher on Thursday, with the Invesco Solar ETF (TAN) rising 2.6%. Array Technologies led the rally with a 7.5% gain, followed by SolarEdge Technologies, which increased by 5.6%. The solar sector is poised to benefit from cheaper financing, as many companies in this space rely on debt to fund growth and expansion.

Small-Cap Stocks to Benefit from Rate Cuts

Jeffrey Gundlach, CEO of DoubleLine Capital, noted that small-cap stocks could see a stronger upside from the Fed’s easing cycle. “Much of the Russell 2000 companies have floating-rate debt, which makes them more sensitive to interest rate changes,” he explained. Gundlach believes that while large-cap companies like those in the S&P 500 hold fixed-rate debt, small caps could receive a bigger boost from additional rate cuts, especially in sectors outside of financials.

Darden Restaurants Earnings Disappoint

Darden Restaurants reported weaker-than-expected quarterly earnings, with Olive Garden and its fine-dining brands struggling. For the quarter ending August 25, Darden posted earnings of $1.75 per share, missing analyst expectations of $1.83. Revenue also came in slightly below forecasts at $2.76 billion, compared to $2.8 billion expected.

Olive Garden, Darden’s flagship brand, saw a 2.9% decline in same-store sales, while its fine-dining segment, which includes Eddie V’s and The Capital Grille, reported a 6% drop. LongHorn Steakhouse was the lone bright spot, with same-store sales growing by 3.7%.

Despite the soft quarter, Darden shares rose 10% in premarket trading, as the company maintained its full-year earnings forecast, projecting earnings per share between $9.40 and $9.60 and net sales of $11.8 billion to $11.9 billion.

Market Forecast: Bullish

Looking ahead, the Fed’s rate cut is expected to support further market gains, particularly in sectors like technology, banking, and solar energy, which are sensitive to changes in interest rates. Small-cap stocks, especially those with floating-rate debt, are likely to outperform as borrowing costs decrease. While volatility may persist as new economic data is released, the overall outlook remains bullish for equities in the near term.