Wall St gears up for rally after Fed kicks off easing cycle
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BofA expects Fed to go for 75-bp cut in Q4
US big banks rise after Fed's jumbo rate cut
Weekly jobless claims stand at 219,000
Futures up: Dow 1.13%, S&P 500 1.58%, Nasdaq 2.14%
Updated at 8:36 a.m. ET/1236 GMT
By Johann M Cherian and Purvi Agarwal
Sept 19 (Reuters) -Wall Street was set to rally on Thursday, with the benchmark S&P 500 poised to notch a record high after the Federal Reserve kicked off its easing cycle with half-a-percentage point reduction and forecast more cuts were on the horizon.
Rate-sensitive growth stocks that have led much of this year's rally such asMicrosoft MSFT.O added 1.6%, while Meta META.O and AlphabetGOOGL.O advanced 2.4% each inpremarket trading.
Semiconductor stocks also climbed. Nvidia NVDA.O rose 3.3%, while AdvancedMicro Devices AMD.O gained 3.6% andBroadcom AVGO.O added 3.8% with the broader market.
Futures tracking the domestically focused Russell 2000 index RTYc1 shot up 2.7% to touch levels last seen on July 31.
A lower interest environment could mean prospects of lower operatingcosts and greater profits for credit-dependent companies.
At 08:36 a.m. ET, Dow E-minis 1YMcv1 were up 470 points, or 1.13%, S&P 500 E-minis EScv1 were up 89.75 points, or 1.58% and Nasdaq 100 E-minis NQcv1 were up 418.75 points, or 2.14%.
After delivering its super-sized verdict on Thursday, theFed forecast rates to fall by another 50 bps by year-end. The central bank also unveiled macroeconomic projectionsthat analysts say reflect a goldilocks scenario, where growth is steady and inflation and unemployment stay low.
On the data front, jobless claims for the week ended Sept. 14 stood at 219,000, lower than economists' estimates of 230,000.
"There's a delayed reaction to the Fed's rate cut ... the claims came in low, so it's only going to help fuel the idea that a soft landing is in play," said Ross Mayfield, investment strategist at Baird.
"The guidance for plenty more cuts by the end of 2025 should open up (rate sensitive) sectors to reengage and expand."
Traders now see a 66.4% chance that the central bank will lower interest rates by 25 basis points at its November meeting, as per the CME Group's FedWatch tool.
BofA Global Research now anticipates a total of 75 bps rate cuts by the end of this year, compared with 50 bps forecast earlier.Citigroup revised its rate-cut expectations for December to a smaller 25 bps, from a forecast of a bigger move.
Goldman Sachs now expects consecutive 25 bps cuts from November 2024 through June 2025.
Market reaction in the aftermath of the decision was muted, with all the three indexes closing slightly lower in the previous session.
However, data going back to 1970 from Evercore ISI showed the S&P 500 has posted an average 14% gain in the six months following the first reduction of a rate-cutting cycle.
September has generally been a disappointing month for U.S. equities with the S&P 500 .SPX notching an average loss of 1.2% since 1928. The benchmark index haslogged losses so far this month.
JPMorgan Chase & Co JPM.N added 1.3%, Bank of America BAC.N climbed 1.5% and Wells Fargo WFC.N advanced 1.8% after the big banks lowered their respective prime rates. Citigroup C.N also rose 1.9% after cutting its base lending rate.
Progyny PGNY.O was among a few stocks that traded lower. The fertility benefits management firm plunged 24% after a significant client notified the company it had elected to exercise a 90-day optionto terminate its services agreement.
US inflation and interest rates https://reut.rs/4esuPHd
Reporting by Johann M Cherian and Purvi Agarwal in Bengaluru; Editing by Nivedita Bhattacharjee and Maju Samuel
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