On Thursday, September 19, 2024, U.S. stock index futures experienced a notable surge following the Federal Reserve's decision to begin its easing cycle with a significant 50 basis point rate cut.

Dow Jones Futures rose 475 points, or 1.2%, while S&P 500 Futures gained 85 points, or 1.5%, and Nasdaq 100 Futures climbed 390 points, or 2%. This optimistic market response comes after the Fed’s cut, which was the first since 2020, marking the beginning of a likely easing cycle.

The central bank's recent reduction was at the higher end of market expectations, signaling that many policymakers anticipate two additional 25bps cuts this year. However, market speculation suggests that the Fed might reduce rates even more aggressively. Analysts at Citi expect the Fed to implement another 50bps cut during its November meeting.

Despite the enthusiasm surrounding potential future cuts, Chairman Powell tempered expectations by stating that the Fed does not plan to return to an era of ultra-low interest rates, akin to those seen during the height of the COVID-19 pandemic. He indicated that the central bank’s neutral rate is likely to be significantly higher than in the past, although he did not provide specific figures.

In addition to the Fed's announcements, traders are keenly awaiting earnings reports from major companies, including Darden Restaurants, FedEx, and Lennar Corporation. Notably, Dell Technologies saw its stock rise over 3% after declaring a quarterly cash dividend.

In related market activity, crude oil prices rose following the Fed's interest rate cut, which has sparked hopes of increased economic activity in the U.S., the world's largest oil consumer. As of 03:45 ET, the Brent contract gained 1.3% to $74.59 per barrel, while U.S. crude futures (WTI) traded 1.4% higher at $70.87 per barrel. This price increase comes despite concerns over global demand, which continue to cap potential gains.

The recent U.S. government data showed a larger-than-expected 1.63 million barrel draw in inventories, significantly exceeding the forecast of a 0.2 million barrel draw. However, this draw was accompanied by increases in distillates and gasoline inventories, adding complexity to the market's outlook.

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