U.S. Stock Futures Edge Higher as Markets Weigh Fed’s Cautious Stance and Trump’s Victory

U.S. stock index futures ticked up slightly on Friday, hovering near record highs as investors continued to process the Federal Reserve’s outlook on interest rate cuts and the potential economic policies under President Donald Trump’s second term.

Futures Indicate Modest Gains

At 05:05 ET (10:05 GMT), Dow Jones Futures gained 10 points, or 0.1%, while S&P 500 Futures and Nasdaq 100 Futures also rose by 0.1%, maintaining positive momentum from earlier in the week. The major indices have enjoyed strong gains, buoyed by expectations of expansionary fiscal policies and improved market sentiment.

On Thursday, the S&P 500 climbed 0.7%, and the Nasdaq Composite surged 1.5%, both achieving new record highs. The Dow Jones Industrial Average ended flat but remains close to its own record peak. For the week, the S&P 500 and the Dow are each up around 4%, with the Nasdaq leading with a robust 5.6% increase through Thursday’s close.

Federal Reserve Signals Cautious Approach

The Federal Reserve announced a widely anticipated 25 basis point cut to its benchmark interest rate, bringing it to a range of 4.5% to 4.75%. During a subsequent press conference, Fed Chair Jerome Powell emphasized that the central bank’s decisions would remain data-driven, regardless of the recent presidential election outcome.

Powell highlighted that inflation is moderating in line with expectations, while economic growth continues to be solid. He reassured markets by downplaying concerns over an economic slowdown, yet maintained ambiguity regarding the extent of future rate cuts. Powell had previously suggested that the neutral rate—where monetary policy neither stimulates nor restrains the economy—would likely remain higher than in past cycles.

Market Reaction and Rate Cut Expectations

Traders are closely monitoring the Fed’s next moves, with CME FedWatch data showing a 76.1% probability of another 25 basis point cut in December. The remaining 23.9% of investors expect rates to stay unchanged. This uncertainty adds an element of caution to the market’s otherwise bullish sentiment.

The combination of political developments and central bank policy continues to shape investor expectations. With a focus on potential tax cuts, deregulation, and infrastructure spending under Trump’s administration, markets are keen to see how these factors will influence economic performance and the Fed’s approach.

The week ahead promises further insights into the evolving economic landscape, with market participants watching for data releases and additional commentary from Federal Reserve officials.