U.S. Stock Futures Rise as Markets Anticipate Aggressive Fed Rate Cut

U.S. stock index futures edged higher on Tuesday as investors grew optimistic about the Federal Reserve’s anticipated rate-cutting cycle, with expectations leaning towards a larger reduction later this week.

As of 06:15 ET (10:15 GMT), Dow Jones Futures climbed 115 points, or 0.3%, S&P 500 Futures gained 20 points, or 0.4%, and Nasdaq 100 Futures rose 100 points, or 0.5%. This follows a mixed session on Wall Street on Monday, where the Dow Jones Industrial Average gained 0.6% to hit a record high, while the S&P 500 inched up 0.1%. However, the Nasdaq Composite slipped 0.5%, weighed down by tech stocks.

The U.S. Federal Reserve’s two-day meeting starts today, with markets increasingly expecting a 50 basis point (bps) interest rate cut. CME Fedwatch data shows a 68% probability of this larger reduction, while the remaining 32% of traders are betting on a smaller 25 bps cut.

Uncertainty over the size of the rate cut has spurred recent market volatility, although the S&P 500 and Dow remain near record highs. Fed Chair Jerome Powell’s comments following the meeting will be closely scrutinized, as investors seek clarity on how aggressive the central bank’s easing cycle will be in the months ahead.

While inflation remains persistent, recent data showing a cooling labor market could support the case for more rate cuts. Additionally, U.S. retail sales data, set to be released later on Tuesday, is expected to show a contraction for August, potentially bolstering the argument for a 50 bps rate cut.

In corporate news, Intel (NASDAQ: INTC) surged over 7% in premarket trading after the company announced plans to spin off its foundry business. The foundry unit will be given its own board and will seek external investment to raise capital. Intel also revealed plans to sell part of its stake in Altera, a strategy aimed at stabilizing its cash position after disappointing quarterly earnings last month. Additionally, Intel announced a deal to produce custom chips for Amazon Web Services (NASDAQ: AMZN).

Microsoft (NASDAQ: MSFT) shares rose 2% in premarket trading after the tech giant revealed a $60 billion share buyback program and increased its quarterly dividend by 10%.

As investors anticipate key policy moves from the Fed, corporate developments like Intel’s strategic plans and Microsoft’s shareholder rewards continue to fuel optimism in the market.